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Impairment and Negative Equity in the Irish Mortgage Market

Author Info

Listed author(s):
  • 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.

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File URL: https://centralbank.ie/docs/default-source/publications/research-technical-papers/research-technical-paper-09rt11.pdf?sfvrsn=8
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Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 9/RT/11.

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Date of creation: May 2011
Handle: RePEc:cbi:wpaper:9/rt/11
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Keywords: Credit; Solvency; Delinquency; Copula;

Other versions of this item:

Find related papers by 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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  1. Genest, Christian & Rémillard, Bruno & Beaudoin, David, 2009. "Goodness-of-fit tests for copulas: A review and a power study," Insurance: Mathematics and Economics, Elsevier, vol. 44(2), pages 199-213, April.
  2. Wilson Sy, 2007. "A Causal Framework for Credit Default Theory," Research Paper Series 204, Quantitative Finance Research Centre, University of Technology, Sydney.
  3. Benítez-Silva, Hugo & Eren, Selçuk & Heiland, Frank & Jiménez-Martín, Sergi, 2015. "How well do individuals predict the selling prices of their homes?," Journal of Housing Economics, Elsevier, vol. 29(C), pages 12-25.
  4. Ferreira, Fernando & Gyourko, Joseph & Tracy, Joseph, 2010. "Housing busts and household mobility," Journal of Urban Economics, Elsevier, vol. 68(1), pages 34-45, July.
  5. David Duffy, 2010. "Negative Equity in the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 41(1), pages 109-132.
  6. Henley, Andrew, 1998. "Residential Mobility, Housing Equity and the Labour Market," Economic Journal, Royal Economic Society, vol. 108(447), pages 414-427, March.
  7. Neil Bhutta & Jane K. Dokko & Hui Shan, 2010. "The depth of negative equity and mortgage default decisions," Finance and Economics Discussion Series 2010-35, Board of Governors of the Federal Reserve System (U.S.).
  8. Georgarakos, Dimitris & Lojschova, Adriana & Ward-Warmedinger, Melanie E., 2009. "Mortgage Indebtedness and Household Financial Distress," IZA Discussion Papers 4631, Institute for the Study of Labor (IZA).
  9. Keeney, Mary J. & O’Donnell, Nuala, 2009. "Financial Capability:New Evidence for Ireland," Research Technical Papers 1/RT/09, Central Bank of Ireland.
  10. McCarthy, Yvonne & McQuinn, Kieran, 2010. "How are Irish households coping with their mortgage repayments? Information from the SILC Survey," Research Technical Papers 2/RT/10, Central Bank of Ireland.
  11. Andrew Haughwout & Ebiere Okah & Joseph Tracy, 2016. "Second Chances: Subprime Mortgage Modification and Redefault," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(4), pages 771-793, 06.
  12. Scaillet, Olivier, 2007. "Kernel-based goodness-of-fit tests for copulas with fixed smoothing parameters," Journal of Multivariate Analysis, Elsevier, vol. 98(3), pages 533-543, March.
  13. 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.
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Cited by:

  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. 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.
  4. McCarthy, Yvonne & McQuinn, Kieran, 2013. "Price expectations, distressed mortgage markets and the housing wealth effect," Research Technical Papers 06/RT/13, Central Bank of Ireland.
  5. repec:eee:quaeco:v:64:y:2017:i:c:p:171-182 is not listed on IDEAS
  6. 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.
  7. 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.
  8. McGuinness, Anne, 2011. "The Distribution of Property Level Mortgage Arrears," Economic Letters 06/EL/11, Central Bank of Ireland.
  9. 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.
  10. McCarthy, Yvonne & McQuinn, Kieran, 2014. "Deleveraging in a highly indebted property market: Who does it and are there implications for household consumption?," Research Technical Papers 05/RT/14, Central Bank of Ireland.

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