What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears

The Economic and Social Review, Vol. 44, No. 1, Spring, 2013, pp. 117–150

34 Pages Posted: 12 Dec 2014

See all articles by Reamonn Lydon

Reamonn Lydon

Central Bank of Ireland

Yvonne McCarthy

Central Bank of Ireland

Date Written: December 11, 2014

Abstract

This paper presents a comprehensive analysis of Irish mortgage arrears using a new loan-level dataset which incorporates data from four Irish banks. We identify the main characteristics of accounts in arrears and examine the role of ability-to-pay and equity factors in the recent hike in mortgage delinquency rates. We find that borrowers who took out their mortgage for buy-to-let purposes, those with high loan-to-value ratios and those with high repayment burdens are all more likely to be in arrears. This is also the case for borrowers with properties in regions that have suffered more severe economic shocks, as proxied for by changes in the regional unemployment rate. Our empirical analysis suggests that affordability issues and general macroeconomic developments have had an important and sizeable effect on arrears trends over time, suggesting that policy efforts to target the growing level of mortgage arrears need to take account of these issues.

Keywords: Debt, Mortgage Delinquency, Arrears, Default

JEL Classification: D14, G21

Suggested Citation

Lydon, Reamonn P and McCarthy, Yvonne, What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears (December 11, 2014). The Economic and Social Review, Vol. 44, No. 1, Spring, 2013, pp. 117–150, Available at SSRN: https://ssrn.com/abstract=2536925

Reamonn P Lydon

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

Yvonne McCarthy (Contact Author)

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

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