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A NEW REPORT has highlighted the stressed nature of a huge amount of Irish mortgages.

The report, titled Resolving Non-Performing Loans in Ireland: 2010-2018 and co-authored by deputy governor of the Central Bank Sharon Donnery, suggests that progress has been made in tackling the issue of long-term mortgage arrears here, but admits the ‘significant complexity’ of the issue.

As at end December, 28,946 Primary Dwelling House (PDH) loans in Ireland had been in arrears for at least two years, which represents 60% of all loans in distress for greater than 90 days.

Of that figure, 44% (about 12,700 at June 2017) have been in arrears for more than five years. This is a 10% increase on the same figure seen one year previously.

As at the end of 2016, 61% of borrowers in mortgage arrears for greater than 720 days had engaged with their lender with a view to putting a sustainable solution to their distressed loan in place.

The remaining 39% who have not engaged are in worsening situations according to Donnery.

“Durable restructures have been the prominent method for non-performing loan mortgage resolution in Ireland,” she said.

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Getting worse

However, whilst the amount of late-stage arrears cases is decreasing, a significant number of cases remain, and appear to be getting worse.

The financial crisis brought great hardship to many people, but the engagement of borrowers is essential for this issue to be effectively tackled.

The Central Bank’s approach now is to make non-performing loans its primary focus, while the new report highlights the protections offered to consumers under the Credit Servicing Act and its own Code of Conduct on Mortgage Arrears – with the clear message that if you’re struggling with a mortgage the best solution is to tackle the problem head-on rather than failing to engage.

87% of those loans which have been restructured following engagement with the lender are now performing according to the new report.

So, while the situation appears to be improving for those who engage, things are gradually spiralling for those in long-term distress, with the average length and balances of such arrears increasing.

120,000 mortgages have been restructured in recent years. Meanwhile, since the height of the crash in 2009, 8,195 homes have been surrendered by their owners, mostly voluntarily.

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2,722 homes were repossessed following a court order during that time.

“Experience has taught us that there is no single measure that will resolve non-performing loans. NPLs remain one of the primary sources of vulnerability in our economy today and resolving them is in all our interests,” said Donnery.

They inhibit a bank’s ability to fulfil its primary function of lending to the economy. Ultimately, they push up costs for the banks and result in higher rates of borrowing for prospective home-buyers or businesses seeking to expand.

You can read the full report here