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Exploring missed mortgage payments in the first year of monetary tightening

Author

Listed:
  • Shaikh, Sameer

    (Central Bank of Ireland)

  • Kilgarriff, Paul

    (Central Bank of Ireland)

  • Gaffney, Edward

    (Central Bank of Ireland)

Abstract

This Note assesses entry rates of mortgages into arrears since 2012 using loan-level data for Irish domestic banks, with a focus on the monetary tightening period from June 2022 to June 2023. Entry into mortgage arrears reached very low levels by mid-2022 and has remained low, though increasing slightly in 2023. Mortgages with a history of performance problems are more likely to enter arrears, as are mortgages that originated before 2009 and older borrowers. Since 2022, tracker-rate mortgages have been more likely to miss payments than other mortgages. Although most flows into arrears are among mortgages with historical repayment challenges and tracker mortgages, 16 per cent of borrowers entering arrears were on fixed or standard variable rates with no history of mortgage non-performance.

Suggested Citation

  • Shaikh, Sameer & Kilgarriff, Paul & Gaffney, Edward, 2023. "Exploring missed mortgage payments in the first year of monetary tightening," Financial Stability Notes 9/FS/23, Central Bank of Ireland.
  • Handle: RePEc:cbi:fsnote:9/fs/23
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    File URL: https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/mortgage-borrowers-missing-payments-during-monetary-tightening.pdf?sfvrsn=9ee19d1d_8
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    References listed on IDEAS

    as
    1. Byrne, David & McCann, Fergal & Gaffney, Edward, 2023. "The interest rate exposure of mortgaged Irish households," Financial Stability Notes 2/FS/23, Central Bank of Ireland.
    2. John Y. Campbell & João F. Cocco, 2015. "A Model of Mortgage Default," Journal of Finance, American Finance Association, vol. 70(4), pages 1495-1554, August.
    3. 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.
    4. 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.
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