Updated: Wednesday, 2nd June, 2010 4:41pm

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Warning of danger from rise in serious mortgage arrears

According to recent figures, more than 32,000 Irish homeowners are now in arrears.

Legal rights group FLAC expressed grave concern this week over fresh figures from the Financial Regulator that show mortgage arrears continuing to rise steadily.

The independent organisation stressed that a comprehensive set of solutions to this crisis must be put in place as a matter of extreme urgency.

According to the new figures, there are now 32,321 mortgages in arrears of more than 90 days, which is 4.1 per cent of the total number of residential mortgages. This upward trend in residential arrears is accelerating, with a 13 per cent rise for the first quarter of 2010, compared to a rise of nine per cent in the previous quarter. This is an increase of nearly 300 new arrears cases per week.

More worryingly, says FLAC, two out of every three of these are in arrears of more than six months. This ratio has remained stable since last year. Some 10,504 are in arrears between three and six months while 21,817 are in arrears of six months or more.

While there is a decrease in the number of legal actions in each quarter, nonetheless, more homes are repossessed by lenders than are sold. Over the past nine months, this figure has risen from 243 properties in possession to 456 - a rise of 88 per cent. Thus, more homes are being voluntarily surrendered or abandoned than are being repossessed by court order, which means no legal proceedings are necessary.

A combination of economic recession and the collapse in house prices has trapped many people in mortgage debt and negative equity, says FLAC, whose approach to this situation has consistently been that most people find themselves in arrears through events outside their control such as unemployment, reduced working hours, business failures, ill-health or higher interest rates.

FLAC said it was extremely concerned that, in his remarks to the Insurance Institute of Ireland around the moral hazard and cost of assisting those in serious mortgage arrears, the Financial Regulator suggested that these people engaged in excessive borrowing.

The focus of actions thus far has been on the survival of the financial system while ignoring the human consequences, added FLAC. The medium and long-term effects of allowing chronic over-indebtedness to slide on a 'wait-and-see' basis may be catastrophic, in terms of healthcare costs, social disorder and potential homelessness. "Thus, the taxpayer may ultimately face a bigger bill if this problem is not confronted in a constructive manner," added a spokesperson.

A measure of how worried the general public is about this issue may be seen in queries to FLAC's telephone information line and to its legal advice centres. About one in five calls on debt to the telephone information line are about mortgage arrears; about a quarter of people visiting advice centres on a debt-related matter are seeking help on mortgage arrears.