Hi Shortie
Negative equity is certainly a contributory factor to non-payment. If you have a mortgage of €100k on a property worth €200k, you have a lot to lose through non-payment. And you have very little to gain, unless it's a cheap tracker.
On the other hand, if you have €100k of negative equity, you are less likely to be worried about non-payment.
I think that the increase in values has been the main factor in the reduction in arrears. People suddenly realised that they had an asset worth keeping.
From our experience in the possession courts, about 20% of the homes for which orders were granted, were definitely empty or abandoned. It was probably more but couldn't be confirmed.
I don't know where the Central Bank got the 14,000 figure. It was 14,000 accounts by the way which would represent around 11,000 homes as many homes have more than one account associated with them.
There are 10,000 homes where the arrears are greater than 5 years. Interestingly, 14% of these are paying the current repayment in full, so the arrears must be quite old in those cases.
The behaviour of the banks is often hard to explain. However, if they could repossess those 10,000 homes and sell them, they certainly would, whether they are in negative equity or not.
It would be great if the Central Bank provided some meaningful analysis of the greater than 5 years in arrears category:
- Percentage where no payment has been made in 1 year, 3 years, 5 years
- Percentage in negative equity
- Percentage where formal legal proceedings have been initiated
Brendan