Irish Household Finances Survey

Irish Household Finances Survey 2007

25 October 2007

Speaking at the release of the study Mr Austin Hughes, Chief Economist, IIB Bank, said, ‘the 2007 survey results suggest the vast bulk of Irish borrowers are coping with the impact of higher interest rates. Substantial increases in after tax incomes and the focused assistance of higher mortgage relief have eased the burden posed by higher monthly loan repayments. The fact that most Irish households continue to take a comparatively cautious attitude to debt helps in no small way.’

‘The study also puts the build-up of debt in the context of a transformation of the Irish economy’ said Mr. Hughes. ‘While it is important to focus on the pace at which debt is rising, we often overlook the other side of the balance sheet. Strong income gains have seen many consumers use debt to finance what has been a dramatic rise in household wealth in recent years. Although higher interest rates have caused some squeeze, the finances of Irish consumers remain in a very strong position.’

Dr. David Duffy, Economist, ESRI added ‘mortgages continue to be the main form of borrowing for most Irish consumers. The survey shows no sign of any marked deterioration in consumer’s perception of their mortgage debt burden. However, higher interest rates mean consumers are feeling some squeeze from mortgage debt levels.’

Dr Duffy added “The survey also suggests that there is no significant difference in consumer’s perception of their mortgage debt burden for those who borrowed after 2003 and those who borrowed prior to that. This may well reflect the interest rate cycle over the period.”

Main Points

·         While higher interest rates have inflicted some pain on Irish consumers, there is no evidence of a sharp deterioration in their debt burden in the past year.

·         Strong growth in after tax incomes and the increase in mortgage interest relief likely limited the damage from larger monthly loan repayments.

·         Irish borrowers continue to be far more cautious in relation to debt than their UK counterparts in spite of notably lower interest rates and faster income growth on this side of the Irish Sea.

·         Very recent mortgage borrowers (post 2003) don’t appear to be under greater strain than more ‘mature’ borrowers.   This may reflect a greater expectation of tough financial circumstances in the early years of a mortgage on their part as well as a smaller than expected easing in the burden faced by ‘older’ mortgage holders.

·         Not surprisingly, borrowers with both mortgage and non-mortgage debt face a notably heavier burden than others. 

·         98 per cent of Irish households are managing their current borrowing without substantial concerns.

·         The rise in consumer debt in recent years needs to be seen in context of a substantial rise in the wealth of the average Irish household.

·         At end 2007 Irish households are expected to owe roughly €200 billion but they also hold over €330 bio of financial assets and have houses worth an estimated €630 bio.

Irish Household Finances Survey 2007 Size: 229.8K bytes

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