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Impairment and Negative Equity in the Irish Mortgage Market

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  • Kelly, Robert

    (Central Bank of Ireland)

  • McCarthy, Yvonne

    (Central Bank of Ireland)

  • McQuinn, Kieran

    (Central Bank of Ireland)

Abstract

Understanding the true scale of the difficulties in the Irish mortgage market is of key importance from a financial stability, fiscal and social perspective. To date, much of the analysis and discussion of the Irish market has tended to focus on either the concept of mortgage repayment distress or potential negative equity. However, the combination of these two factors raises fundamental policy issues. Building on earlier work, which used the Survey on Income and Living Conditions (SILC), we marry existing estimates of repayment distress with estimates of negative equity for a representative sample of Irish households. Using copula modelling we then examine the dependence structure across the distributions of mortgage delinquency and solvency for these households. As a result, we are in a position to estimate the probability that a household experiencing repayment distress might also be in negative equity.

Suggested Citation

  • Kelly, Robert & McCarthy, Yvonne & McQuinn, Kieran, 2011. "Impairment and Negative Equity in the Irish Mortgage Market," Research Technical Papers 9/RT/11, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:9/rt/11
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    7. Georgarakos, Dimitris & Lojschova, Adriana & Ward-Warmedinger, Melanie E., 2009. "Mortgage Indebtedness and Household Financial Distress," IZA Discussion Papers 4631, Institute of Labor Economics (IZA).
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    9. Yvonne McCarthy & Kieran McQuinn, 2011. "How Are Irish Households Coping with their Mortgage Repayments? Information from the Survey on Income and Living Conditions," The Economic and Social Review, Economic and Social Studies, vol. 42(1), pages 71-94.
    10. Wilson Sy, 2007. "A Causal Framework for Credit Default Theory," Research Paper Series 204, Quantitative Finance Research Centre, University of Technology, Sydney.
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    1. repec:cbi:qtbart:y:2014:m:010:p:60-70 is not listed on IDEAS
    2. McCarthy, Yvonne & McQuinn, Kieran, 2013. "Credit conditions in a boom and bust property market," Research Technical Papers 08/RT/13, Central Bank of Ireland.
    3. Yvonne McCarthy & Kieran McQuinn, 2017. "Price Expectations, Distressed Mortgage Markets and the Housing Wealth Effect," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 478-513, April.
    4. McCarthy, Yvonne & McQuinn, Kieran, 2017. "Credit conditions in a boom and bust property market: Insights for macro-prudential policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 171-182.
    5. McCarthy, Yvonne, 2014. "Dis-entangling the mortgage arrears crisis: The rolw of the labour market, income volatility and housing equity," Research Technical Papers 02/RT/14, Central Bank of Ireland.
    6. McGuinness, Anne, 2011. "The Distribution of Property Level Mortgage Arrears," Economic Letters 06/EL/11, Central Bank of Ireland.
    7. Kennedy, Gerard & McIndoe-Calder, Tara, 2012. "The Irish Mortgage Market: Stylised Facts, Negative Equity and Arrears," Quarterly Bulletin Articles, Central Bank of Ireland, pages 85-108, February.
    8. Yvonne McCarthy & Kieran McQuinn, 2017. "Deleveraging in a Highly Indebted Property Market: Who does it and are there Implications for Household Consumption?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(1), pages 95-117, March.
    9. Kelly, Robert & O'Malley, Terence & O'Toole, Conor, 2015. "Designing Macro-prudential Policy in Mortgage Lending: Do First Time Buyers Default Less?," Research Technical Papers 02/RT/15, Central Bank of Ireland.
    10. Eoin Corrigan & Daniel Foley & Kieran McQuinn & Conor O’Toole & Rachel Slaymaker, 2019. "Exploring Affordability in the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 50(1), pages 119-157.
    11. 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.
    12. Linn, Andrew & Kelly, Anne-Marie & Bailey, Samuel, 2014. "Irish Residential Mortgage-Backed Securities – Preliminary Analysis of Loan-Level Data," Quarterly Bulletin Articles, Central Bank of Ireland, pages 60-70, October.

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    More about this item

    Keywords

    Credit; Solvency; Delinquency; Copula;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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