Mortgage arrears slowed ahead of the first interest rate cut announced by the European Central Bank (ECB) last month, but figures suggested cost pressures continue to burden some households.
By the end of March, Central Bank figures showed there were 703,308 private residential mortgage accounts in the Republic and 47,620 of these homes were in arrears.
The total number of mortgage accounts in arrears over 90 days and up to one year fell 3% to 28,769 compared to the last three months of 2023.
However, early-stage arrears crept upwards by 1%, following 3% increases in each of the previous two quarters.
Brokers Ireland chief executive Diarmuid Kelly indicated the cause of slowdown is likely due to households prioritising their mortgage payments over other expenses and some are “often eating into savings to do so”.
Mr Kelly also said the level of mortgages in long-term arrears with so-called non-banks, which are also known as vulture funds, is “worrying” due to the high interest rates they charge.
Vulture funds and their agents have seemingly strengthened their grip in Ireland by gaining more control of residential mortgages in arrears.
In the first three months, 40% of residential mortgage accounts in arrears were held by banks, whereas 60% were held by non-banks entities. A year earlier, 46% were held by banks and the remaining 54% were held by non-banks.
Mr Kelly said rates charged by non-bank entities can be double what the three main lenders in the retail banking market in the Republic charge.
Mr Kelly also noted of the total stock of 55,533 residential mortgages restructured, 20% are in arrears and one of the primary methods for restructuring is arrears capitalisation, “which for many is not a sustainable solution at all, it merely kicks the problem down the road”.
Mr Kelly said mortgage customers should get some relief from cost pressures as the ECB is poised to make at least one more interest rate reduction this year.
The ECB reduced its key lending rate by 0.25% to 4.25% last month, as data points to cooling inflation.
Nearly 180,000 Irish borrowers with tracker mortgages in the Republic benefited immediately as they have taken the brunt of the ECB rate hikes since July 2022.
However, a significant slice of the 429,000 Irish households who have fixed-rate mortgage loans will have a longer wait to discover whether they will tap the full benefits from the rate cut.
The roadmap of further ECB rate cuts remain uncertain, with some experts expecting two more by the end of the year, while others conservatively predict just one more reduction before 2025.
