# Some arrears data from Central Bank's mortgage conference



## Brendan Burgess (14 Oct 2011)

We were inundated with statistics at yesterday's Central Bank conferenc on mortgages. It seemed to me that some of them were contradictory.  I was in and out of the conference as I had two other events on simultaneously - so I didn't get a chance ask any questions. 

The papers are non online yet, and there were very few hard copy versions available, but here are some of the notes I made. I have asked the CB to make the papers available. 

I think it was Reamonn Lydon of the Central Bank who produced a slide saying that 50% of those in arrears are actually in positive equity. This really surprised me and I will look into it further. 

It seemed to conflict with a slide from Yvonne McCarthy - but her slide was too complex to take in. 

*Composition of arrears
*

 4 unnamed banks|50%
sub-prime|10%
the rest|40%So sub-prime lenders account for 10% of the arrears and 2% of the mortgage market. 

Before 2007, there was less than 1% arrears. 

Although there are 55,000 mortgages in arrears according to the Central Bank arrears data, this represents 45,000 households. I knew that some houses had two mortgages on them, but I am surprised that it is as much as 20%. (This 20% adjustment was supported by another set of data where 364,000 loans represented 276,000 properties) 

I have used the figure of 770,000 mortgages when discussing this, but in reality it's probably around 600,000 households. Actually it might be more as you would probably expect a higher arrears rate among houses with more than one mortgage. 

The 10% of  loans in trouble increases to 20% when you include arrears of less than 90 days.  Again, this struck me as high.

The numbers going into early arrears are showing signs of reducing. (no data, just a general statement) 

40% of those in arrears of more than 90 days, have got back on track. This was attributed to Kelly (2011) - I don't know though who this Kelly is. 

According to Blackrock - the most significant determinant of arrears is the extent of negative equity. 

According to Blackrock - 48% of loans were in negative equity at 31 December 2010. 

According to the Central Bank - the primary driver is unemployment. 

Unemployment is a big driver of arrears amongst buy to lets - again this surprised me. 



Brendan


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## Sunny (14 Oct 2011)

Sounds interesting Brendan. Hopefully they will make the slides available. 50% of arrears in positive equity amazes me to be honest! If that is true, we are not having a crisis!


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## Graftgirl (14 Oct 2011)

My mortgage company sent me paperwork last week and they put the value of my property at way over what I told them it was worth, they added €80,000 to the figure that I gave them, I found it very difficult to give them a value for my property as it over 2-3 yrs since anything has sold on my road..
So isn't it possible that the determination of whether a mortgage is in negative/positive equity might not be entirely accurate.
I would have said my mortgage was in negative equity of about €100,000 but the figures they chose to use on their paperwork put me only in negative equity of about €20k.
Where are the statistics of the properties valuations coming from, are they coming from the mortgages companies in some cases..


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## Brendan Burgess (14 Oct 2011)

Hi Grafter

That is a good question.  I will follow up with the author. 

They don't look at individual houses. They look at the price paid and reduce it by the index. 

If we have 45,000 in arrears, of whom 18,000 have positive equity, then we have "only" 27,000 people in arrears and with negative equity.  It is still a serious problem, but maybe it's not a crisis. 



Brendan


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## bugler (14 Oct 2011)

There's a bit of everything in there..


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## Brendan Burgess (18 Oct 2011)

Here are all the papers. 

[broken link removed]

Brendan


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## onq (19 Oct 2011)

Don't understand the alleged connection between arrears and negative equity.

Totally understand the alleged connection between arrears and unemployment.


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## Sunny (19 Oct 2011)

onq said:


> Don't understand the alleged connection between arrears and negative equity.
> 
> Totally understand the alleged connection between arrears and unemployment.


 
Just read the slide there from Blackrock. Hard to be 100% sure what they are claiming without hearing them explain it. I think their point is simply that higher negative equity or falling house prices is a good indicator about what to expect on the arrears side. I think they only mean it is a good predictor of arrears which makes sense. They are not claiming that negative equity by itself causes arrears.

Some very interesting presentations there.


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## csirl (19 Oct 2011)

> I think it was Reamonn Lydon of the Central Bank who produced a slide saying that 50% of those in arrears are actually in positive equity. This really surprised me and I will look into it further.


 
This is an interesting statistic and what it tells us is that current government strategy i.e. 12 months delay in repossessions, long drawn out processes that keep people in arrears in their houses, is actually unsuitable for at least 50% of the people who are in this situation.

Government policy should be encouraging this category of person to have their house sold (thru repossession or voluntary) asap as it will put them in a position whereby they have no debt, no mortgage repayments and possibly some cash in hand. If working, these people can probably rent for less than what their mortgage repayments were. If not, we've a generous rent allowance scheme in SW. So there is no danger of them being homeless.

Keeping these people in their houses for the medium term is guaranteed to put them in the nightmare almost impossible to get out of scenario of negative equity coupled with arrears.


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