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Debt giveth and debt taketh away: mortgage debt burdens in Ireland

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  • McIndoe-Calder, Tara

    (Central Bank of Ireland)

Abstract

Households reduced their debt levels by a fifth between 2008 and 2014. This pattern of deleveraging differs markedly across the age distribution. Young borrowers (born after 1970) reduced their debt levels by 13% compared to 35% for Older borrowers (born before 1960). The difference arises because Young borrowers have larger mortgages - and longer remaining loan durations, and therefore a greater share of repayments is an interest payment. Mortgage repayments for the typical tracker borrower have fallen by 34% since 2008. SVR borrowers’ repayments have fallen by just 9%. Relative to Older borrowers, Young borrowers are more likely to be on a tracker rate, reflecting the mortgage products available at loan origination. However, Young borrowers continue to face a heavy debt-burden and are at risk of higher interest rates in the future.

Suggested Citation

  • McIndoe-Calder, Tara, 2017. "Debt giveth and debt taketh away: mortgage debt burdens in Ireland," Economic Letters 11/EL/17, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:11/el/17
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    References listed on IDEAS

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    1. Lydon, Reamonn & McIndoe-Calder, Tara, 2017. "The great Irish (de)leveraging 2005-14," Working Paper Series 2062, European Central Bank.
    2. Kelly, Jane & Kennedy, Gerard & McIndoe-Calder, Tara, 2014. "Interest-only mortgages in Ireland," Economic Letters 05/EL/14, Central Bank of Ireland.
    3. Jacob Krimmel & Kevin B. Moore & John Edward Sabelhaus & Paul A. Smith, 2013. "The current state of U.S. household balance sheets," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 337-359.
    4. Kelly, Robert & Lyons, Paul & O'Toole, Conor, 2015. "Mortgage Interest Rate Types in Ireland," Economic Letters 09/EL/15, Central Bank of Ireland.
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