Fianna Fáil Finance spokesperson Michael McGrath has called for an overhaul of the government’s policy response to the level of mortgage arrears in the buy to let sector. This week the Department of Finance published statistics which show a 27% rate of arrears amongst the buy to let sector with 21% of accounts in arrears for more than 90 days.

Deputy McGrath commented, “The priority in relation to mortgage arrears had to initially deal with the owner occupied sector. However this should not preclude the government from taking decisive action to deal with the problems in the buy to let sector. The failure to get to grips with the arrears problem in the buy to let sector is have a destabilising effect on the overall housing market.

“76% of arrears cases have not had a restructuring arrangement, either temporary or permanent, put in place. In fact the figures in relation to permanent restructuring arrangements show a negligible rate of progress. Between June and July of this year there was just one additional permanent restructuring plan put in place in respect of buy to let mortgages.  The banks’ strategy appears to be to rely on continuing increases in house prices and rents to solve the problem for them. This ignores the fundamentally weak nature of the sector and the need to put in place sustainable long term solutions which are both reasonable for the borrower and the banks.  In many cases properties were purchased with an initial interest-only period. A Central Bank report has indicated a significant number of interest-only mortgages are due to revert to principal-and-interest repayments in the next 2 years. The resulting higher repayments for these borrowers could lead to an increase in mortgage arrears.  

“We need to act now to prevent another wave of buy to let properties falling into arrears as borrowers begin to make capital repayments. The use of split mortgages as a long term solution has been very limited with just 712 completed to date. By contrast, the far less effective measure of capitalising arrears has been used in seven times as many restructuring cases. The banks need to actively identify those cases that are in danger of falling into arrears and work with the customer to put in place solutions that are fair to both parties.

“I am also concerned by the possibility of significant numbers of repossessions of buy to let properties. We already have a social housing crisis with many tenants struggling with increased rents and a lack of security in their tenancy. Widespread repossessions would be disastrous for the private rented sector as it could potentially unleash a wave of evictions of sitting tenants. In determining the appropriate policy response to buy to let arrears the needs of tenants and the stability of the private rental sector should be fully considered”.