Repayment capacity, debt service ratios and mortgage default: An exploration in crisis and non-crisis periods. ESRI Working Paper No. 652 February 2020

In this paper, we explore the impact of current household repayment capacity on mortgage default using household-level panel data over the period 2004-2017 for Ireland. We measure repayment capacity as changes in the level of the current debtservice to income ratio to capture a direct channel for affordability shocks. We model the relationship between repayment capacity and default using a discrete time logit survival model of default flows. We test for a non-linear relationship to explore whether negative and positive shocks have asymmetric effects and whether shocks depend on household absorptive capacity. We also test the differing impacts of repayment shocks in crisis and non-crisis times and whether any differences are explained by negative equity or liquidity constraints. A number of endings emerge. We find that deteriorations in current debt service capacity have a positive and increasing effect on default which is dependent on the level of indebtedness or absorptive capacity. We find that the relationship between deteriorations in the repayment capacity and default are worsened in crisis times and we show that this is due to the presence of negative equity and liquidity constraints in these periods

The Financial Crisis and the Changing Profile of Mortgage Arrears in Ireland. ESRI Research Notes 2014/4/2

Understanding which households go into mortgage arrears during both boom and bust periods in Ireland is of critical importance to ensure suitable policies are deployed to safeguard future financial stability. Many of the difficulties in Ireland arose from the loosening of underwriting standards by financial institutions. This led to excessive household leverage ratios and provided households with limited buffers with which to absorb shocks (McCarthy and McQuinn, 2017; Lydon and McCann, 2017). The joint effects of labour market difficulties and large falls in house prices led to a situation where nearly one-in-five mortgage loans was in arrears at the height of the crisis (McCarthy, 2014)

Estimating an SME investment gap and the contribution of financing frictions. ESRI WP589, March 2018

In this paper, we use firm-level survey data to explore the determinants of SME investment activity and the extent to which observed investment is in line with that suggested by economic fundamentals. In contrast to previous literature which has focused on whether investment gaps exist at a more aggregate level, we find evidence that for SMEs actual investment is below what would be expected given how companies are currently performing. The estimated magnitude of this investment gap is economically meaningful at just over 30 per cent in 2016. We explore the extent to which the gap is explained by financial market challenges such as access to finance, interest rates, and the availability of collateral. Financing frictions are found to account for a moderate share of the overall investment gap (between 10 per cent and 20 per cent of the gap)

Resilience Mediates the Relationship Between Socio-Cognitive Mindfulness and Perceived Stress in Academic Middle Managers in Higher Education

Faculty, staff, and administrators in higher education have experienced rising stress levels due to an increasingly turbulent environment amid constant change and uncertainty. In particular, academic middle managers experience increasingly high demands and significant stressors in the ever-changing landscape of higher education. Most research that addresses stress among academic middle managers has focused on the management of stressors and emphasized the need for additional training and technical support rather than how to address adaptive challenges. However, emerging research has provided promising evidence of the positive effects of mindfulness in reducing the perception of stress and enhancing resilience, both of which support the importance of adaptive challenges and improve job-related and organizational outcomes. Despite the recent rise in mindfulness scholarship from the Eastern perspective, there is a dearth of literature on the relationship between Langer’s (2014) construct of socio-cognitive mindfulness, resilience, and stress. This quantitative correlational study aimed to understand how socio-cognitive mindfulness predicts perceived stress among academic middle managers in higher education and whether the relationship between mindfulness and perceived stress is mediated by resilience. Academic middle managers within four-year U.S. institutions of higher education—department chairs, associate/assistant deans, and deans—were recruited via email, and a total of 163 participants completed an online survey. Since the researcher collected data during the initial response to the novel coronavirus (COVID-19) pandemic, supplemental questions were included and addressed the satisfaction of the institution’s response to transitioning to an online teaching, learning, and working environment as well as work stress and overall stress levels amid the pandemic. Findings indicated that socio-cognitive mindfulness predicted perceived stress at a statistically significant level, and resilience fully mediated the relationship between mindfulness and stress. In addition, results identified that socio-cognitive mindfulness, resilience, and perceived stress levels were higher among academic middle managers than other populations in previous studies. This study was the first to indicate that higher socio-cognitive mindfulness levels resulted in lower perceived stress and that socio-cognitive mindfulness may be a direct path to reducing stress and an indirect path by building resources like resilience. Discussion and recommendations that consider the COVID-19 pandemic’s influence on the results and implications are also addressed

Back to the future? Macroprudential policy and the rebirth of local authority mortgages in Ireland. ESRI Working Paper 686 December 2020.

The global financial crisis heralded a new era of macroprudential mortgage regulations such as loan-to-value and loan-to-income restrictions. Such measures safeguard the financial system but can lead to credit access difficulties, in particular for first-time buyers. In this paper, we examine the introduction of a direct public mortgage, the Rebuilding Ireland Home Loan, which aims to address these difficulties in Ireland. We use new unique granular microdata for applications to the scheme to explore the relationship between households applying to the scheme and the broader commercial market. We show that RIHL applicants, particularly those in urban areas, are under-served by the commercial market as they cannot borrow sufficient amounts due to the regulatory framework. The scheme enables these lower to middle-income borrowers to access mortgage credit and thus directly targets the externality from the regulatory regime. We argue that these public, local authority loans, once accompanied by suffcient safeguards, can be an essential tool to bridge credit gaps while ensuring the commercial banks are subject to strong macroprudential rules

A county-level perspective on housing affordability in Ireland. ESRI Research Notes 2019/4/2

The issue of housing affordability in Ireland has come to the fore in recent years as house prices have increased significantly following the recovery. In a recent survey, Corrigan et al. (2019a) find that 86.5 per cent of renters expressed a preference for homeownership. However, rising house prices have led to serious concerns about the ability of first time buyers (FTB) to enter the housing market. This group has been cited as one particular pressure point in recent assessments of market affordability (Housing Agency, 2017). Analysis published in the ESRI Quarterly Economic Commentary (McQuinn et al., 2018) finds that house price growth has been uneven across the distribution, with cheaper properties growing at faster rates than more expensive properties. This is likely to further exacerbate the affordability concerns of first time buyers, who typically enter the housing market at lower house price levels than second and subsequent borrowers

Review of the Rebuilding Ireland Home Loan scheme. ESRI Research Series 104 October 2020.

This report provides a high-level review of the degree to which the Rebuilding Ireland Home Loan (RIHL) has met its objectives. It also scopes the need for ongoing intervention, details who is applying for the scheme and assesses selected operational considerations such as credit risks, funding considerations, and its market impact

Exploring Affordability in the Irish Housing Market. ESRI WP593, June 2018

This paper examines housing affordability in Ireland by looking at the distribution of housing costs across households. Using microdata from the SILC survey over the period 2005-2015, the contribution of this paper is threefold. First, the paper considers the trends in the cost of housing in Ireland across groups of households split by age, region, household structure, and their position in the income distribution. Second, we apply selected international housing affordability definitions and explore the share, and composition, of households in Ireland that would be captured by these definitions. We do not find evidence of universal affordability difficulties in the Irish market. However, certain groups do face acute affordability challenges. Third, working towards a definition of housing cost affordability for use in Irish policy discussions, we provide some guidance as to what such a definition could look like

Credit demand in the Irish mortgage market: What is the gap and could public lending help? ESRI Working Paper 671 October 2020.

In this paper, we estimate credit demand for potential Irish first time buyer households currently living in the rental sector. Exploiting individual survey responses to credit demand questions, and characteristics of the household, we estimate the level of latent credit demand that could be serviced by the market given prudent credit risk assessment and the current regulatory environment. We then compare this demand to current market provision to explore whether a credit gap exists. We find evidence of excess demand for credit and an undersupply of loans relative to latent demand. In terms of credit access issues, we find that insufficient savings for a down-payment, rather than income or affordability, is the most binding constraint. Scenario analysis suggests between 2,000 and 9,000 additional loans could be provided per annum depending on the degree to which demand is realised. This would imply an additional €0.4bn to €1.9bn in lending. We show a targeted public mortgage credit instrument could alleviate a portion of this gap and aid market access by providing between 1,100 and 5,800 loans at between €0.2bn to €1bn approximately

The RTB Rent Index, Quarter 4 2020. ESRI Indices Report March 2021.

The Rent Index is produced by the Residential Tenancies Board (RTB) and the Economic and Social Research Institute (ESRI). It provides rental indicators (such as the Rent Index) generated to track price developments in the Irish market. Rents grew nationally by 2.7% in Q4 2020 in comparison to 6.4% in Q4 2019. The national standardised average rent stood at €1,256 in Q4 2020, equal to its level in Q3 2020