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Do first time buyers default less? Implications for macro-prudential policy

Author

Listed:
  • Kelly, Robert

    (Central Bank of Ireland)

  • O'Malley, Terry

    (Central Bank of Ireland)

  • O'Toole, Conor

    (Central Bank of Ireland)

Abstract

Macro-prudential policy is designed to address risk at a systemwide level, an example of which is mortgage default following excessive residential property lending in Ireland. Policy tools to address this risk, such as caps on loan- to-value and loan-to-income ratios, are used to build balance sheet resilience and by design should re ect the risk profile of borrower groups. This research considers whether default rates are different between first time buyers and second and subsequent buyers and finds that first time buyers have lower default rates having controlled for borrower and loan characteristics. This research is consistent with differential regulatory treatment of first time buyers with default risk remaining comparable to the remainder of mortgage lending.

Suggested Citation

  • Kelly, Robert & O'Malley, Terry & O'Toole, Conor, 2014. "Do first time buyers default less? Implications for macro-prudential policy," Economic Letters 14/EL/14, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:14/el/14
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    File URL: https://centralbank.ie/docs/default-source/publications/economic-letters/economic-letter---vol-2014-no-14.pdf?sfvrsn=10
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    References listed on IDEAS

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    Cited by:

    1. Kelly, Robert & McCann, Fergal, 2016. "Some defaults are deeper than others: Understanding long-term mortgage arrears," Journal of Banking & Finance, Elsevier, vol. 72(C), pages 15-27.

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