Ireland: NPL Update: Latest Arrears Statistics; Horizon-Scanning

The Central Bank of Ireland published its latest statistics on residential mortgage arrears this week, covering Q2 2023.

PDH Mortgage Accounts

• The number of accounts in arrears fell by almost 4% quarter-on-quarter, but increased very slightly (by 232 accounts) year-on-year.
• The number of accounts in > 90 days' arrears was up very slightly on Q1 2023 (by 52 accounts); the overall percentage of accounts in > 90 days' arrears remains static at 4.1%.
• The statistics show a continuing decline in both long-term mortgage arrears (down 2.8% quarter-on-quarter) and early arrears (down 9.9% quarter-on-quarter).
• Split mortgages continue to be the most common restructuring option, followed by arrears capitalisation and term extension.
• Non-bank entities hold 16% of all accounts (in arrears or otherwise), and 75% of all accounts in > 1 year's arrears.

BTL Mortgage Accounts

• The total number of accounts in arrears continues to reduce gradually (down 417 quarter-on-quarter). The overall percentage of accounts in arrears remains relatively static at approximately 11%.
• The number of accounts in > 90 days' arrears decreased from 7,848 to 7,757.
• Term extensions and arrears capitalisation remain the most common restructuring options.
• NBLs hold 38% of all accounts, 71% of all accounts in arrears, and 82% of all accounts in > 10 years' arrears.

What's on the horizon?

• EU Credit Servicing Directive: The 29 December 2023 transposition deadline is approaching. While we have not yet seen transposing legislation, the Department of Finance has indicatedthat it is currently planning for two parallel regimes: the Directive's framework would apply to post-transposition sales and servicing of NPLs originated by EU banks, with the existing framework continuing to apply to the sale and servicing of performing loans, pre-transposition NPLs originated by EU banks, and the sale and servicing of NPLs originated by non-bank lenders. For more information, read our insights here.
• Consumer Protection Code (CPC) Review (will impact BTLs): The Central Bank plans to consult on its CPC review in Q4 2023, following its October 2022 discussion paper (read our insights on the Discussion Paper here). While not expressly mentioned in the discussion paper, the management of BTL arrears involving personal consumers comes within the current CPC, so the consultation paper will need to be carefully reviewed to check for any changes to that framework. Read our latest insights here.
• Code of Conduct on Mortgage Arrears (CCMA): While the Central Bank hasn't signposted any planned changes to the CCMA, it confirmed that as part of its CPC review it will consolidate the CCMA and other "existing standalone consumer protection codes and regulations" into the revised CPC (which will take the form of regulations) – it is keen to locate all consumer-protection codes and regulations in the one place. Read our latest insights here.
• Department of Finance: As part of its recently-published Financial Consumer Protection Roadmap which sets out what we can expect to see from a legislative and policy perspective over the next two years, the Department confirmed that it will chair a new intra-departmental group which has been tasked by the Government with looking at whether additional policy or operational measures should be considered to address long-term mortgage arrears.
• Switching/Sustainable Solutions: Ensuring that regulated firms are supporting mortgage switching is a priority area for both the Department and the Central Bank – the retail banks and three non-bank lenders agreed eligibility criteria for mortgage switching earlier this month. The provision of long-term sustainable solutions to borrowers in financial difficulties against a backdrop of rising interest rates is also a key focus area.