Wednesday 13 December 2017

Income cuts rather than job losses drive mortgage arrears

Majority in mortgage arrears are employed
Majority in mortgage arrears are employed

THE majority of those in mortgage arrears have a job, but have been hammered by cuts to their take-home pay, according to striking new research.

The new findings challenge the view that unemployment is the main driver of mortgage arrears and cites wage cuts, a loss of overtime and reduction in hours.

The study found that three-quarters of arrears cases are in a household that is headed up by a person in a job.

The paper, by Central Bank-based Yvonne McCarthy, found that 65pc of those distressed borrowers who are still in a job were hit by a fall in wages.

It is the first time research in this country has looked at the income and employment status of those in arrears.

Unsurprisingly, it found people on higher incomes were less likely to be behind on their repayments.

The income of those in arrears is typically €35,000 a year, compared with an income of €65,000 typically earned by those who are keeping up their repayments.

And people who have standard variable-rate mortgages, rather than a cheap tracker, have a higher tendency to fall behind on their home-loan repayments, the study by a Central Bank economist has found.

One in five mortgage accounts is in arrears as the country suffers its worst-ever household debt crisis.

Close to 100,000 residential mortgage accounts are three months or more in arrears.

Some 32,000 of these are two years or more in arrears.

And another 40,400 buy-to-let mortgages are three months or more in arrears.


The research included a survey of 2,000 mortgage holders and data gathered by the Central Bank on arrears.

But the findings are regarded as a working paper, and have not yet been endorsed by the Central Bank.

But the sheer scale of the numbers in arrears who are working came as a shock to the researcher.

Ms McCarthy wrote: "Given that unemployment is typically assumed to be a key driver of mortgage repayment distress, this figure is somewhat surprising."

People working in the private sector have a higher likelihood to be in arrears, than those in the public sector, the paper finds.

And people in arrears but who also have a job are more likely to have a history of unemployment, have a temporary work contract, or be in their current job for a short period.

"While a significant portion of borrowers in arrears are still in employment, many of these borrowers have experienced a deterioration in affordability," she said.

The paper was presented to the Statistical and Social Inquiry Society of Ireland.

"The results show that the current mortgage crisis, and efforts to prevent a further deterioration, requires more than simply targeting overall unemployment or negative equity," Ms McCarthy said.

"Rather, such efforts should also aim to strengthen labour market conditions and job security as well as targeting long-term unemployment," she added.

Meanwhile, a website run by the Citizens Information Board to help those in mortgage arrears has seen a surge in visits.

Figures from the Citizens Information Board show its site,, saw 136,047 visits last year.

Charlie Weston Personal Finance Editor

Irish Independent

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