DUBLIN (Reuters) - The number of Irish homeowners whose mortgages were in arrears continued to decline in the second quarter, but the pace of the decline slowed, as the government prepared a new scheme to offer those in most distress a sustainable solution.
Ireland’s economy has recovered rapidly since it emerged from an international bailout four years ago, but the legacy of the crisis is still evident in the 7.1 percent of homeowners whose mortgages remain more than 90 days in arrears, almost a decade after a property-market crash.
Although that is down from a peak of 12.9 percent in 2013, the proportion in arrears fell only slightly in the second quarter from the first quarter’s 7.2 percent. Most of those are more than two years behind in payments, central bank data showed on Tuesday.
The policy of successive governments in Ireland has been to keep families in their homes where possible. Repossessions are rare by international standards, with lenders pushed to restructure loans or sell them to non-bank entities.
Housing Minister Eoghan Murphy said on Friday that he would offer a revised “mortgage to rent” scheme by the end of the month, where private firms could buy distressed mortgages and offer the homeowner security of tenure at a rent they can afford, with the state paying the balance.
The government hopes that by widening the eligibility and offering investors a state guarantee, it can reverse the low participation when the scheme began in 2012, particularly among the 32,000 accounts now in arrears over 720 days.
That was down quarter-on-quarter and from a peak of 38,000 two years ago. However, those homeowners represented 90 percent of the total 2.7 billion euros (2.43 billion pounds) owed in arrears, an average of 76,500 euros per borrower.
“We believe that the mortgage-to-rent scheme will play an important role in the resolution of long-term mortgage arrears, reducing potential repossessions and thereby limiting the need for additional state housing,” Diarmaid Sheridan, an analyst at Davy Stockbrokers, wrote in a note.
“From a bank’s perspective, the scheme will also assist in reducing non-performing exposures at a time when institutions are under regulatory pressure to reduce their exposure to non-performing loans.”
Analysts at Goodbody Stockbrokers said that while the revised scheme would not be transformative, it would offer banks a helpful alternative to further restructurings and disposals.
Editing by Larry King