Two recent data releases show just how cold the climate has become for both SMEs and home owners.  On the SME side, a report commissioned by the Department of Finance has found that banks are refusing more loans to small and medium businesses than they are reporting. The five banks surveyed – AIB, Bank of Ireland, Anglo Irish Bank, National Irish Bank and Ulster Bank – report refusal rates of 14% but the report undertaken by accountancy firm, Mazars, suggests the real figure is 18%. The report points to inadequate recording of refusals by frontline bank staff as a reason why refusal rates have been underreported. This also raises the question of what constitutes a “refusal” – for example, if a bank offers a borrower a lesser sum than originally requested, or less favourable lending facilities, is this a refusal? The credit situation facing SMEs may be more precarious than headline figures suggest, particularly as SMEs’ revenues continue to take a pounding.

For homeowners, the threat of repossession appears to be far more severe than previous data had indicated. According to the Financial Regulator,  over 26,000 residential mortgage account holders  were in arrears for more than 90 days as at the end of September 2009 – with these arrears valued at €4.8 billion. Even more worrying are the figures on court proceedings in pursuit of arrears. Of the 218 enforcement proceedings concluded during the quarter ending September 2009, only 46% (101) of these cases were settled either by renegotiating the mortgage or on other terms. The courts granted 79 repossession orders, and the remaining cases ended in either voluntary surrender or abandonment of the properties in question. This 46% rate of renegotiation doesn’t appear to be indicative of  a willingness to postpone repossession as a last resort and certainly doesn’t inspire confidence in the oft-cited advice to home owners that they should communicate their financial difficulties to the lender. Anecdotal evidence also illustrates some lenders unwillingness to renegotiate: as was widely reported last week, Stepstone Mortgage Funding secured a repossession order from the High Court against a Waterford family who had offered to repay €800 a month on their €277,000 mortgage which had built up arrears of €40,000.

Anyone peddling lines such as “the worst is over” and “we’ve turned a corner” should have a serious rethink.

Declan Curran

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