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Interest-only mortgages in Ireland

Author

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  • Kelly, Jane

    (Central Bank of Ireland)

  • Kennedy, Gerard

    (Central Bank of Ireland)

  • McIndoe-Calder, Tara

    (Central Bank of Ireland)

Abstract

This Economic Letter analyses original interest-only mortgages in Ireland. While interest-only arrangements have been widely used as a means of temporary forbearance to deal with the current mortgage arrears crisis, mortgages were also originated on interest-only terms during the height of the boom. The analysis shows that original interest-only mortgages were mainly issued to buy-to-let (BTL) investors on tracker mortgages, between 2005-2008 at high loan- to-value ratios (LTVs). They are more likely to be to Dublin borrowers and for apartments than standard mortgages and the arrears rates are higher. A signi cant number are due to revert to principal-and-interest repayments in the next few years. The resulting higher repayments could lead to an increase in mortgage arrears.

Suggested Citation

  • Kelly, Jane & Kennedy, Gerard & McIndoe-Calder, Tara, 2014. "Interest-only mortgages in Ireland," Economic Letters 05/EL/14, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:05/el/14
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    File URL: https://centralbank.ie/docs/default-source/publications/economic-letters/economic-letter---vol-2014-no-5.pdf?sfvrsn=10
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    References listed on IDEAS

    as
    1. Doyle, Nicola, 2009. "Housing Finance Developments in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 75-88, October.
    2. Kelly, Robert & O’Malley, Terence, 2016. "The good, the bad and the impaired: A credit risk model of the Irish mortgage market," Journal of Financial Stability, Elsevier, vol. 22(C), pages 1-9.
    3. Kennedy, Gerard & McIndoe-Calder, Tara, 2012. "The Irish Mortgage Market: Stylised Facts, Negative Equity and Arrears," Quarterly Bulletin Articles, Central Bank of Ireland, pages 85-108, February.
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    Cited by:

    1. Lydon, Reamonn & McIndoe-Calder, Tara, 2017. "The great Irish (de)leveraging 2005-14," Working Paper Series 2062, European Central Bank.
    2. McIndoe-Calder, Tara, 2017. "Debt giveth and debt taketh away: mortgage debt burdens in Ireland," Economic Letters 11/EL/17, Central Bank of Ireland.
    3. Gaffney, Edward & Kinghan, Christina & Nevin, Ciarán, 2018. "An Overview of Interest-Only Mortgages in Ireland," Financial Stability Notes 3/FS/18, Central Bank of Ireland.
    4. Gaffney, Edward & Kinghan, Christina & Nevin, Ciarán, 2018. "An Overview of Interest-Only Mortgages in Ireland," Financial Stability Notes 03-18, Central Bank of Ireland.

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