IDEAS home Printed from https://ideas.repec.org/p/cbi/ecolet/05-el-17.html
   My bibliography  Save this paper

The income distribution and the Irish mortgage market

Author

Listed:
  • Lydon, Reamonn

    (Central Bank of Ireland)

  • McCann, Fergal

    (Central Bank of Ireland)

Abstract

In this Letter we study the evolution of the prevalence of groups of households from across the population income distribution in the Irish mortgage market. We document a period of financial liberalization between 1994 and 2007, where the share of new mortgages issued going to those in the top income quintile fell from 57 to 27 per cent, while those in the middle quintile increased their share from 13 to 29 per cent. The impact of the recent crisis is shown to have had a pronounced impact in the Previous-Owner mortgage market, where negative equity has impeded many households from purchasing property with a second or subsequent mortgage: the share of the top income quintile in this market segment has risen from 27 to 65 per cent in the period 2007 to 2014, marking a significant reversal relative to the pre-2007 period. The Buy to Let segment is shown to be composed predominantly of those at the top of the income distribution, with little variation across the 1994-2014 period. Finally, higher-income households are shown to borrow with higher Loan to Value but lower Loan to Income mortgages in all periods.

Suggested Citation

  • Lydon, Reamonn & McCann, Fergal, 2017. "The income distribution and the Irish mortgage market," Economic Letters 05/EL/17, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:05/el/17
    as

    Download full text from publisher

    File URL: https://www.centralbank.ie/docs/default-source/publications/economic-letters/vol-2017-no-5-the-income-distribution-and-the-irish-mortgage-market.pdf?sfvrsn=2
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brunetti, M. & Ciciretti, R. & Djordjevic, Lj., 2016. "The determinants of household’s bank switching," Journal of Financial Stability, Elsevier, vol. 26(C), pages 175-189.
    2. Lawless, Martina & Lydon, Reamonn & McIndoe-Calder, 2015. "The Financial Position of Irish Households," Quarterly Bulletin Articles, Central Bank of Ireland, pages 66-89, January.
    3. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1449-1496.
    4. Kinghan, Christina & McCarthy, Yvonne & O'Toole, Conor, 2016. "The Effects of Macroprudential Policy on Borrower Leverage," Economic Letters 08/EL/16, Central Bank of Ireland.
    5. Kelly, Robert & O'Malley, Terence & O'Toole, Conor, 2015. "Designing Macro-prudential Policy in Mortgage Lending: Do First Time Buyers Default Less?," Research Technical Papers 02/RT/15, Central Bank of Ireland.
    6. Coates, Dermot & McNeill, Joe & Williams, Brendan, 2016. "Estimating Cash Buyers and Transaction Volumes in the Residential Property Sector in Ireland, 2000-2014," Quarterly Bulletin Articles, Central Bank of Ireland, pages 68-81, July.
    7. Keys, Benjamin J. & Pope, Devin G. & Pope, Jaren C., 2016. "Failure to refinance," Journal of Financial Economics, Elsevier, vol. 122(3), pages 482-499.
    8. Kelly, Jane & Lydon, Reamonn, 2017. "Home purchases, downpayments and savings," Economic Letters 02/EL/17, Central Bank of Ireland.
    9. Manuel Adelino & Antoinette Schoar & Felipe Severino, 2016. "Editor's Choice Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle Class," Review of Financial Studies, Society for Financial Studies, vol. 29(7), pages 1635-1670.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Corrigan, Eoin & O'Toole, Conor & Slaymaker, 2020. "Credit demand in the Irish mortgage market: What is the gap and could public lending help?," Papers WP671, Economic and Social Research Institute (ESRI).
    2. Kelly, Jane & Le Blanc, Julia & Lydon, Reamonn, 2018. "Pockets of risk in European Housing Markets: then and now," Research Technical Papers 12/RT/18, Central Bank of Ireland.
    3. Eoin Corrigan & Daniel Foley & Kieran McQuinn & Conor O’Toole & Rachel Slaymaker, 2019. "Exploring Affordability in the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 50(1), pages 119-157.
    4. Gaffney, Edward, 2018. "Residential property price segments and mortgage finance," Financial Stability Notes 11/FS/18, Central Bank of Ireland.
    5. Gaffney, Edward, 2018. "Residential property price segments and mortgage finance," Financial Stability Notes 11-18, Central Bank of Ireland.
    6. O'Toole, Conor & Slaymaker, Rachel, 2020. "Review of the Rebuilding Ireland Home Loan scheme," Research Series, Economic and Social Research Institute (ESRI), number RS104, June.
    7. Disch, Wendy & Slaymaker, Rachel, 2023. "Housing affordability: Ireland in a cross-country context," Research Series, Economic and Social Research Institute (ESRI), number RS164, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    2. repec:bin:bpeajo:v:49:y:2019:i:2018-01:p:429-513 is not listed on IDEAS
    3. Piskorski, Tomasz & Seru, Amit, 2021. "Debt relief and slow recovery: A decade after Lehman," Journal of Financial Economics, Elsevier, vol. 141(3), pages 1036-1059.
    4. Alessia De Stefani, 2021. "House price history, biased expectations, and credit cycles: The role of housing investors," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(4), pages 1238-1266, December.
    5. Manconi, Alberto & Braggion, Fabio & Zhu, Haikun, 2018. "Can Technology Undermine Macroprudential Regulation? Evidence from Peer-to-Peer Credit in China," CEPR Discussion Papers 12668, C.E.P.R. Discussion Papers.
    6. Albanesi, Stefania & DeGiorgi, Giacomo & Nosal, Jaromir, 2022. "Credit growth and the financial crisis: A new narrative," Journal of Monetary Economics, Elsevier, vol. 132(C), pages 118-139.
    7. Deeksha Gupta, 2018. "Too Much Skin-in-the-Game? The Effect of Mortgage Market Concentration on Credit and House Prices," 2018 Meeting Papers 512, Society for Economic Dynamics.
    8. Mosso-Martínez, Margarita M. & López-Herrera, Francisco, 2020. "Variables económicas y deterioro de la calidad de la cartera de hipotecas bursatilizadas en México," eseconomía, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 15(52), pages 47-68, Primer se.
    9. Rojas, Alejandro, 2021. "Mortgage credit growth for lower-income borrowers during the 2000s housing boom: Evidence and implications," Journal of Empirical Finance, Elsevier, vol. 62(C), pages 220-233.
    10. Pedro Gete & Michael Reher, 2018. "Mortgage Supply and Housing Rents," The Review of Financial Studies, Society for Financial Studies, vol. 31(12), pages 4884-4911.
    11. Gene Amromin & Jennifer Huang & Clemens Sialm & Edward Zhong, 2018. "Complex Mortgages [Why don’t lenders renegotiate more home mortgages? Redefaults, self-cures, and securitization]," Review of Finance, European Finance Association, vol. 22(6), pages 1975-2007.
    12. Ferrero, Andrea & Harrison, Richard & Nelson, Benjamin, 2018. "House Price Dynamics, Optimal LTV Limits and the Liquidity Trap," CEPR Discussion Papers 13400, C.E.P.R. Discussion Papers.
    13. Olivier Mesly & David W. Shanafelt & Nicolas Huck, 2021. "Dysfunctional Markets: A Spray of Prey Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 55(3), pages 797-819, July.
    14. Andreas Fuster & David Lucca & James Vickery, 2023. "Mortgage-backed securities," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 15, pages 331-357, Edward Elgar Publishing.
    15. Elliot Anenberg & Aurel Hizmo & Edward Kung & Raven Molloy, 2019. "Measuring mortgage credit availability: A frontier estimation approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(6), pages 865-882, September.
    16. Greg Kaplan & Kurt Mitman & Giovanni L. Violante, 2020. "The Housing Boom and Bust: Model Meets Evidence," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3285-3345.
    17. Clark, Brian & Hasan, Iftekhar & Lai, Helen & Li, Feng & Siddique, Akhtar, 2021. "Consumer defaults and social capital⋆," Journal of Financial Stability, Elsevier, vol. 53(C).
    18. Yavuz Arslan & Bulent Guler & Burhan Kuruscu, 2020. "Credit supply driven boom-bust cycles," BIS Working Papers 885, Bank for International Settlements.
    19. Alina K. Bartscher & Moritz Kuhn & Moritz Schularick & Ulrike I. Steins, 2020. "Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016," Working Papers Series inetwp124, Institute for New Economic Thinking.
    20. Madeira, Carlos, 2021. "The potential impact of financial portability measures on mortgage refinancing: Evidence from Chile," Journal of International Money and Finance, Elsevier, vol. 117(C).
    21. James A. Kahn & Benjamin S. Kay, 2019. "The Impact of Credit Risk Mispricing on Mortgage Lending during the Subprime Boom," Finance and Economics Discussion Series 2019-046, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbi:ecolet:05/el/17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fiona Farrelly (email available below). General contact details of provider: https://edirc.repec.org/data/cbigvie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.