There is a short article in today’s Financial Times reporting that the forecast for mergers and acquisitions activity in Ireland in 2013 looks strong. It is tied to a report from the law firm William Fry. High M&A activity is statistically a strongly pro-cyclical variate (but I believe normally more of a lagging indicator rather than a leading indicator).
Author: Gregory Connor
Strategic arrears denotes the amount of funds voluntarily not paid on mortgages by homeowners and buy-to-let investors who have the ability to meet the payments but choose not to do so. The available funds are spent on current (non-necessity) consumption or redirected elsewhere, outside the control of the mortgage-holding bank. Distressed arrears are the “can’t pay” component of mortgage arrears and strategic arrears are the “won’t pay” component.
Irish mortgage arrears, particularly in the buy-to-let sector, are very high by international standards, at 8.8% for principal private residence mortgages and 17.9% for buy-to-let mortgages as of the third quarter of 2012. It is not all bad news, Ireland also has an extremely low rate of repossessions; there were a total of 79 judicial repossessions in the third quarter of 2012, consistent with the general trend over recent years. The Irish repossession/arrears rate is perhaps the lowest in the developed world. Notwithstanding that good news, the mystery of why arrears are so unusually high needs to be tackled.
Namawinelake has a link to the new Fitch report on global property markets, including Ireland which gets considerable attention in the report. The Irish picture is mixed with some positive signals (affordability ratios have become more normal) and other negative signals (continued bank distress limits future mortgage lending).
Fitch also highlights the unusual behaviour of Irish arrears, and connects this to the Irish policy framework.
“Irish Borrowers on Strike: Despite economic stabilisation, Irish arrears continue to trend upwards. Fitch believes this to be partially driven by policy framework changes. Lenders are constrained from large-scale repossessions, dis-incentivising borrowers from paying their mortgages. In addition, borrowers in arrears are also likely to benefit from significant debt write-offs when personal insolvency legislation becomes effective.”
Brian O’Kelly and I have a new policy paper on Eurozone bank resolution; it is in the Special Papers series produced by the Financial Markets Group at LSE.