Seamus Coffey

The Central Bank have released the Q4 2013 update of their mortgage arrears statistics.

For Primary Dwelling Houses (PDHs), 12.6 per cent of accounts are in arrears of 90 days or more. This compares to 11.4 per cent of accounts in similar arrears in the unaudited monthly data for December published by the Department of Finance.

The Department of Finance figures cover the six banks operating under the Mortgage Arrears Resolution Targets (MART) process. These banks (ACC, AIB, BOI, KBC, PTSB, ULSTER) provide 90 per cent of mortgage lending in Ireland so it is clear that the remaining 10 per cent of mortgages (from the former BOSI and INBS as well as the various sub-prime lenders) have a far higher arrears rate – somewhere around 23.5 per cent. The 90-day arrears rates for the INBS and subprime mortgages are greater than 50 per cent.

In today’s Central Bank statistics we see the total number of PDH accounts in arrears continue to fall and for the first time there was a decline in the number of accounts 90 days or more in arrears.

However, the situation of those in existing arrears continues to deteriorate with yet another significant increase in the number of accounts now 720 days or more in arrears (31,834 to 33,589).

On average the accounts greater than 720 days in arrears are just under €42,000 in arrears. Across the statistics there is an average of roughly 1.25 accounts per household.

The outstanding balance on mortgages in arrears fell from €25.6 billion to €24.4 billion of which €18.2 billion are in arrears of 90 days or more. The total amount of arrears rose from €2.17 billion to €2.24 billion.

The total amount of PDH mortgage debt continues to fall and is now at €107.4 billion, compared to €118.6 billion when the series began in September 2009. However, it should be noted that the release mentions “asset sales” that took place over the quarter but it is not clear what impact these have on the figures. The sales refer to mortgages that were sold by one of the reporting institutions, and are therefore no longer included in the statistics.

At the of December there were 84,053 restructured PDH accounts and 79.3 per cent were deemed to be meeting the conditions of the restructure. There is a new table providing these rates by each type of restructure.

Reduced payment less than interest only (4,264) and arrears capitalisation (18,516 accounts) are the worst performing restructures for PDH accounts. There were only 14 accounts granted a permanent interest rate reduction.

As expected the number of split mortgages continues to grow rapidly. It increased from 1,154 in Q3 to 3,268 in Q4 and, with 96.3 per cent compliance, it is the best performing restructure for PDHs. This is likely linked to the incentives built in to the restructure. There are likely to be many more split mortgages coming through as there are 9,722 restructured accounts classed as “Other” most of which are “accounts that have been offered a long-term solution, pending the completion of six months of successful payment.”

There were 63 forced repossession in the quarter and 105 voluntary surrenders.

Court proceedings were initiated in 1,491 cases. Up to Q2 2013 the average number of proceedings issued per quarter was around 250. This increased massively in the second half of 2013. During Q4, 258 court proceedings were concluded and 82 court orders for repossession were granted. Of the 176 concluded by other means it is probable that many of these see the borrower and lender enter a new arrangement through a restructuring of the original loan agreement with others ending by way of voluntary surrender/abandonment.

Data on the Buy-to-Let sector are also included in both releases.

The issue of effective tax rates, especially for the corporate income tax, rightfully continues to attract a lot of attention. The front page of The Irish Times features a story by Carl O’Brien which is based on a recent paper produced by Prof. Jim Stewart. The paper argues that:

“data from the US Bureau of Economic Analysis gives a more accurate estimate of effective tax rates for US subsidiaries operating in Ireland and elsewhere. This data shows that for 2011, US subsidiaries operating in Ireland have the lowest effective tax rate in the EU at 2.2%.”

The paper provides a useful critique of the World Bank/pwc report on effective tax rates but to argue that the BEA data tells us anything about effective tax rates in Ireland is wide of the mark.

For Ireland, the BEA data indicate that, in 2011, US companies here had $144 billion of net income and paid an affective tax rate of 2.2 per cent. The low effective tax is correct but it wasn’t achieved in Ireland.

There is nothing close to $144 billion of US MNC profits in Ireland. Such massive profit figures do not appear in the statistics produced by either the CSO or the Revenue Commissioners. The gap between GDP and GNP is large but it is not that large.

The post continues below the fold. Apologies for the length.