The income distribution and the Irish mortgage market

Reamonn Lydon () and Fergal McCann ()

No 05/EL/17, Economic Letters from Central Bank of Ireland

Abstract: In this Letter we study the evolution of the prevalence of groups of households from across the population income distribution in the Irish mortgage market. We document a period of financial liberalization between 1994 and 2007, where the share of new mortgages issued going to those in the top income quintile fell from 57 to 27 per cent, while those in the middle quintile increased their share from 13 to 29 per cent. The impact of the recent crisis is shown to have had a pronounced impact in the Previous-Owner mortgage market, where negative equity has impeded many households from purchasing property with a second or subsequent mortgage: the share of the top income quintile in this market segment has risen from 27 to 65 per cent in the period 2007 to 2014, marking a significant reversal relative to the pre-2007 period. The Buy to Let segment is shown to be composed predominantly of those at the top of the income distribution, with little variation across the 1994-2014 period. Finally, higher-income households are shown to borrow with higher Loan to Value but lower Loan to Income mortgages in all periods.

Date: 2017-04
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