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Households in long-term mortgage arrears:lessons from economic research

Author

Listed:
  • Kelly, Robert

    (Central Bank of Ireland)

  • McCann, Fergal

    (Central Bank of Ireland)

Abstract

The resolution of the long-term mortgage arrears (those in arrears greater than one year; LTMA) crisis represents one of the key policy challenges in Ireland today. In this Letter we highlight the range of economic and demographic characteristics associated with the experience of LTMA in Ireland. Our analysis suggests that unemployment shocks, changes in mortgage affordability, the accumulation of non-mortgage debt, higher originating loan-to-value ratios and weak housing equity positions all have an important explanatory role. We also outline repayment patterns among households at differing levels of mortgage arrears. It is shown that in 2014, over three quarters of those in LTMA had continued increases in their arrears balances. This contrasts with those in the early stages of arrears, where less than half of all borrowers had arrears increases.

Suggested Citation

  • Kelly, Robert & McCann, Fergal, 2015. "Households in long-term mortgage arrears:lessons from economic research," Economic Letters 11/EL/15, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:11/el/15
    as

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    File URL: https://centralbank.ie/docs/default-source/publications/economic-letters/economic-letter---vol-2015-no-11.pdf?sfvrsn=10
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    References listed on IDEAS

    as
    1. Connor, Gregory & Flavin, Thomas, 2015. "Strategic, unaffordability and dual-trigger default in the Irish mortgage market," Journal of Housing Economics, Elsevier, vol. 28(C), pages 59-75.
    2. 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.
    3. McCann, Fergal, 2014. "Modelling default transitions in the UK mortgage market," Research Technical Papers 18/RT/14, Central Bank of Ireland.
    4. 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.
    5. Kelly, Robert & O'Malley, Terence, 2014. "A Transitions-Based Model of Default for Irish Mortgages," Research Technical Papers 17/RT/14, Central Bank of Ireland.
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    Cited by:

    1. Tsiropoulos, Vasilis, 2018. "A Vulnerability Analysis for Mortgaged Irish Households," Financial Stability Notes 2/FS/18, Central Bank of Ireland.
    2. Tsiropoulos, Vasilis, 2018. "A Vulnerability Analysis for Mortgaged Irish Households," Financial Stability Notes 02-18, Central Bank of Ireland.
    3. McCann, Fergal, 2017. "Resolving a Non-Performing Loan crisis: The ongoing case of the Irish mortgage market," Research Technical Papers 10/RT/17, Central Bank of Ireland.

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