Debt giveth and debt taketh away: mortgage debt burdens in Ireland
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Tara McIndoe-Calder: Central Bank of Ireland
No 11/EL/17, Economic Letters from Central Bank of Ireland
Households reduced their debt levels by a fifth between 2008 and 2014. This pattern of deleveraging differs markedly across the age distribution. Young borrowers (born after 1970) reduced their debt levels by 13% compared to 35% for Older borrowers (born before 1960). The difference arises because Young borrowers have larger mortgages - and longer remaining loan durations, and therefore a greater share of repayments is an interest payment. Mortgage repayments for the typical tracker borrower have fallen by 34% since 2008. SVR borrowers’ repayments have fallen by just 9%. Relative to Older borrowers, Young borrowers are more likely to be on a tracker rate, reflecting the mortgage products available at loan origination. However, Young borrowers continue to face a heavy debt-burden and are at risk of higher interest rates in the future.
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