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What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears

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  • Reamonn Lyndon

    (Central Bank of Ireland)

  • Yvonne McCarthy

    (Central Bank of Ireland)

Abstract

This paper presents a comprehensive analysis of Irish mortgage arrears using a new loan-level dataset which incorporates data from four Irish banks. We identify the main characteristics of accounts in arrears and examine the role of ability-to-pay and equity factors in the recent hike in mortgage delinquency rates. We find that borrowers who took out their mortgage for buy-to-let purposes, those with high loan-to-value ratios and those with high repayment burdens are all more likely to be in arrears. This is also the case for borrowers with properties in regions that have suffered more severe economic shocks, as proxied for by changes in the regional unemployment rate. Our empirical analysis suggests that affordability issues and general macroeconomic developments have had an important and sizeable effect on arrears trends over time, suggesting that policy efforts to target the growing level of mortgage arrears need to take account of these issues.

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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 44 (2013)
Issue (Month): 1 ()
Pages: 117–150

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Handle: RePEc:eso:journl:v:44:y:2013:i:1:p:117-150

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Cited by:
  1. Birmingham, Colin & Conefrey, Thomas, 2011. "The Irish Macroeconomic Response to an External Shock with an Application to Stress Testing," Research Technical Papers 10/RT/11, Central Bank of Ireland.
  2. Gregory Connor & Thomas Flavin, 2013. "Irish Mortgage Default Optionality," Economics, Finance and Accounting Department Working Paper Series n243-13.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  3. Kennedy, Gerard & McIndoe Calder, Tara, 2011. "The Irish Mortgage Market: Stylised Facts, Negative Equity and Arrears," Research Technical Papers 12/RT/11, Central Bank of Ireland.
  4. Kelly, Robert & McQuinn, Kieran, 2013. "On the hook for impaired bank lending: Do sovereign-bank inter-linkages affect the fiscal multiplier?," Research Technical Papers 01/RT/13, Central Bank of Ireland.
  5. Lydon, Reamonn, 2013. "Do households with debt problems spend less?," Economic Letters 02/EL/13, Central Bank of Ireland.
  6. Thorvardur Tjörvi Ólafsson & Karen Á. Vignisdóttir, 2012. "Households’ position in the financial crisis in Iceland. Analysis based on a nationwide household-level database," Economics wp59, Department of Economics, Central bank of Iceland.

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