Have First-Time Buyers continued to default less?

Several countries that have introduced macroprudential limits in the mortgage market apply differential limits to first time buyers relative to second and subsequent buyers. From a financial stability perspective, a key reason for such differentiation stems from a systematic observed difference in the probability of default across these different groups of borrowers. Kelly et al. (2015) already show that, in Ireland, FTBs were significantly less likely to default to the end of 2013. In order to further investigate whether FTBs are inherently less exposed to default, and to confirm that a key rationale of the calibration of the LTV restrictions under the Irish mortgage measures continues to hold, this paper provides two main contributions using Irish loan-level data. First, I show that the evidence of lower default probability among FTBs is consistent over time from 2013 to 2017. Second, in order to address a potential persistency bias, I implement a “default flow analysis” confirming that FTBs default less than SSBs.