Ireland’s Housing Debt Crisis: A Glimmer of Hope?

The latest mortgage data from Ireland suggests that the housing debt crisis may be stabilising. While the number of mortgages in arrears for over 90 days rose, the pace of growth slowed in the third quarter, and fewer borrowers fell into early stage arrears. This tentative sign of stabilisation is a welcome development for Ireland’s economy, which has been struggling to recover from the property boom and subsequent international bailout.

The Road to Recovery

Ireland’s property boom, financed by eager banks, drove the country to seek international help in 2010. Today, almost one in five home loans, worth €25 billion, are still not being fully repaid, with 12.9% in arrears for more than 90 days. However, the number of residential accounts in early arrears of less than three months declined by 6%, indicating that the total number of home loans in arrears fell to 141,520 from 142,892 three months earlier.

The Irish housing market is showing signs of stabilisation.

“I don’t think you can call the figures encouraging, sheerly by the scale of the problem, but it can be now said that the improving economy, particularly in the labour market, looks to be putting a lid on the deterioration,” said Dermot O’Leary, chief economist at Goodbody stockbrokers.

The Labour Market

Data earlier this week showed that unemployment fell at its fastest pace in four years in the third quarter, to 12.8%. This decline in unemployment, combined with annual house price growth hitting a six-year high of 6.1% in October, suggests that the economy is slowly recovering.

The unemployment rate in Ireland is declining.

However, retail sales fell by 0.9% in October from a year earlier, indicating that consumers are still constrained.

The Road Ahead

While the latest mortgage data suggests that the housing debt crisis may be stabilising, there is still a long way to go. Home loans in arrears of over 720 days now constitute 23% of all accounts in difficulty, and a further €11 billion of investment property loans are also in distress. The proportion of buy-to-let mortgages in arrears for more than 90 days stands at 21.2%, up from 20.4% at the end of June.

The number of distressed loans remains a significant challenge for Ireland’s economy.

In conclusion, while the latest mortgage data provides a glimmer of hope for Ireland’s economy, there is still much work to be done to address the housing debt crisis. As the economy continues to recover, it is essential that policymakers and financial institutions work together to restructure and resolve the large stock of distressed loans.