Some 75% of mortgage arrears cases ‘involve employed people’

Central Bank research paper paints more nuanced portrait of distressed borrowers


Some three-quarters of all mortgage arrears cases in Ireland involve a household in which the head is currently in employment.

The somewhat surprising finding, contained in a research paper by Central Bank analyst Yvonne McCarthy, suggests that contrary to widely held beliefs unemployment and negative equity are not the sole drivers of mortgage distress.

The research indicated many struggling borrowers had experienced a significant drop in their income or a recent change in employment circumstances.

The most recent Central Bank data on mortgage arrears suggest about 17 per cent (116,481) of the 697,690 mortgage holders in the country were in arrears of some kind or other at the end of November.

Ms McCarthy’s study, which was based on a combination of administrative loan-level data from the three main mortgage providers and a survey of mortgage holders, provides a more nuanced picture of the problem than previously.

It found 20 per cent of people employed but in arrears had had a recent experience of unemployment compared to only 8 per cent of performing borrowers.

Similiarly, some 24 per cent of distressed borrowers were on temporary employment contracts compared to just 13 per cent of without arrears.

In addition, 16 per cent of employees in arrears had only been with their current employer for less than two years, compared to 6 per cent of performing borrowers.

“Initially when you look at the headline figure you might find it quite surprising, but actually when you dig deeper and look at the characteristics of these employed people [with mortgage arrears] you see that they’re not the same as your typical secure employee,” she told The Irish Times.

“These are people who are on temporary employment contracts; they are relatively new to their job and they have a recent history of unemployment.”

“While unemployment is important in determining mortgage arrears it’s not the full story.”

The research, which was presented to the Statistical and Social Inquiry Society of Ireland last night, also found the proportion of distressed borrowers who are currently employed but who have suffered a fall in nominal wages, overtime or hours of work within their current job was 65 per cent, compared to 54 per cent of performing borrowers.

There was only a slight difference, however, in the proportion of performing versus distressed borrowers who are employed in the public sector, with about 30 per cent of performing borrowers work in the public sector relative to 26 per cent of borrowers in arrears.

Another key finding indicated the median income of those employed but in arrears was €35,000 per annum, compared to €65,000 for those up to date with their mortgages.

“While a significant portion of borrowers in arrears are still in employment, many of them have experienced a deterioration in affordability,” Ms McCarthy said

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