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What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears

Author

Listed:
  • 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.

Suggested Citation

  • Reamonn Lyndon & Yvonne McCarthy, 2013. "What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears," The Economic and Social Review, Economic and Social Studies, vol. 44(1), pages 117-150.
  • Handle: RePEc:eso:journl:v:44:y:2013:i:1:p:117-150
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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