Today’s Irish Times reports (as I suspected) that 88% of the mortgage loans being sold by Ulster Bank are more than three years in arrears and 60% are more than four years in arrears. The banks are not allowing that situation to recur with more recent loans. They are taking action sooner and, to be fair to those who are critical of the banks, they are not handing out 100% mortgages nowadays either. There was a time in the late 90s/00s when you were almost mugged if you went into a bank and didn’t come out with an extravagant loan that you didn’t want or need and couldn’t afford. Nevertheless, the key element (in the part of the Ulster Bank package that I’m interested in) is the lack of engagement by borrowers with the Bank.
The way the Ulster Bank decision was reported on the news yesterday by RTE’s business correspondent (who is a good reporter) was significant: his body language betrayed surprise at what was happening because of its significance. It is the sort of robust action that happens elsewhere but not in this State. It a consequence of globalization, I have to admit, and it trumps the nudge, nudge, wink, wink way the Irish State operates. We have rules for everything but very weak enforcement. There are exceptions like drink driving but it took a generation to change cultural habits there, which are still far from perfect. Nevertheless, anyone who fails a breathalyzer test on the side of the road nowadays will be arrested, prince or pauper. We need that sort of robust approach to the enforcement of all rules, civil or criminal. RTE’s business correspondent made it clear that, as a result of Ulster Bank’s move, borrowers who have failed to engage with their lenders for three, four or more years would be well advised to do so now. That is the key lesson that I hope professional advisers of all non-engaging borrowers will communicate to their clients.
There is a lot of nonsense going on at the moment about forcing the
banks to lower mortgage interest rates. The politicians won’t face up to the real problem, a
good part of which is the very large number of people who have refused to engage with their
lenders about non-performing mortgages for nearly ten years now. Nor, in general, will economists or
commentators or the media generally acknowledge the real problem as they are afraid of being accused of being too tough. (It is called doing your jobs.) The majority of
those refusing to engage with their lenders are probably FF or FG supporters and
because the number is so large they know that the Government won’t let the banks touch them. So, those of
us who never missed a mortgage payment are paying off mortgages, worth millions
or even billions, on behalf of people who refuse to pay them because of our
rotten political system. We are also paying additional taxes, which makes it a triple whammy: our own mortgages, the mortgages of other people and additional taxes. That is simply not acceptable.
I suspect that most of the borrowers
who stopped paying their mortgages did so because they fell on hard times after
2008. Fortunately, the situation has now improved and statistically many (though
no doubt not all) of the borrowers who were unable to pay after 2008 could and
should have resumed at least some payment by now. That is the nub of the
matter.
It should also be pointed out that the refusal of such a large cohort of
borrowers to engage with their lenders has probably forced other people into
difficulty, including out of their homes. Today’s Indo says that it is
probably not a significant number, and I’m inclined to agree, but there is no
doubt that many people are struggling to make monthly payments that are higher
than they would be if those who have refused to engage with their lenders for
almost a decade now stopped behaving in such a typical and selfish Irish
fashion. This is a very, very selfish society, not least because we always have weak
governments that do not impose discipline on a state that is not naturally
self-disciplined like, say, the Nordic states.
I hope AIB and BoI follow Ulster Bank's lead although we can take it as read that the Minister for Finance will not allow them to do so. There will be an election within twelve months. Maybe after that, if a stable Government is formed.
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