The financial crisis and the changing profile of mortgage arrears in Ireland

In this Research Note we explore whether the composition of borrowers who went into arrears during the height of the financial crisis was different from those who were in arrears in the pre-crisis period. We draw on the Irish Survey of Income and Living Conditions (SILC) which contains a wealth of information on both mortgage debt and socio-economic characteristics. We find that in the pre-crisis period, those households in mortgage arrears were more likely to have suffered very severe economic, social or other personal difficulties including ill health or divorce or separation. Arrears cases were also more likely to come from the lower end of the income distribution. Housing equity considerations (negative equity) had no bearing on default as house prices were rising. In contrast, during the systemic crisis, equity considerations played a role and defaults increased to a greater extent amongst higher income groups and those without health or other personal difficulties.