Interest-only mortgages in Ireland

Jane Kelly, Gerard Kennedy and Tara McIndoe-Calder ()
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Gerard Kennedy: Central Bank of Ireland

No 05/EL/14, Economic Letters from Central Bank of Ireland

Abstract: This Economic Letter analyses original interest-only mortgages in Ireland. While interest-only arrangements have been widely used as a means of temporary forbearance to deal with the current mortgage arrears crisis, mortgages were also originated on interest-only terms during the height of the boom. The analysis shows that original interest-only mortgages were mainly issued to buy-to-let (BTL) investors on tracker mortgages, between 2005-2008 at high loan- to-value ratios (LTVs). They are more likely to be to Dublin borrowers and for apartments than standard mortgages and the arrears rates are higher. A signi cant number are due to revert to principal-and-interest repayments in the next few years. The resulting higher repayments could lead to an increase in mortgage arrears.

Date: 2014-07
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