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Estimating the Mortgage Default Probability in Cyprus: Evidence using micro data

Author

Listed:
  • Savvas Antoniou

    (Central Bank of Cyprus)

  • Ioanna Evangelou

    (Central Bank of Cyprus)

  • Theodosis Kallenos

    (Central Bank of Cyprus)

  • Nektarios A. Michail

    (Central Bank of Cyprus)

Abstract

As financial institutions are exposed to the mortgage market, the identification of the characteristics associated with high default risk is crucial for the economy’s financial stability and growth. In this paper, we examine for the determinants of mortgage default for households, using both their economic and socio-demographic characteristics. Using panel data from the Eurosystem Household Finance and Consumption Survey from 2009 to 2017, we find that the mortgage debt service to income ratio, as well as the debt to total household wealth ratio, are positively related with a higher mortgage default probability. In addition, salaried employment reduces such probability and households with more than four members are more prone to mortgage arrears.

Suggested Citation

  • Savvas Antoniou & Ioanna Evangelou & Theodosis Kallenos & Nektarios A. Michail, 2022. "Estimating the Mortgage Default Probability in Cyprus: Evidence using micro data," Working Papers 2022-1, Central Bank of Cyprus.
    • Handle: RePEc:cyb:wpaper:2022-1
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    References listed on IDEAS

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    Cited by:

    1. Kyriaki G. Louka & Nektarios A. Michail, 2022. "Missed Payments, Renegotiations, and Household Consumption," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 20(1), pages 31-50.

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    More about this item

    Keywords

    Eurosystem HFCS; survey; defaults; probability; households;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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