The Central Bank of Ireland has today published a Financial Stability note written by Jane Kelly and Elena Mazza, which uses Irish microdata to show that since 2008. The note says that the resilience of borrowers has improved, in terms of monthly serviceability of mortgage relative to income (MSTI). The purpose of the note is to examine how mortgage service burdens on newly issued mortgages have evolved for different population income cohorts over time.
Average MSTIs on newly issued mortgages are much lower now than pre-crisis, especially among lower-income borrowers. In 2008, borrowers from the two lowest population income quintiles were spending on average just over a third of their net monthly income on servicing their mortgage at origination, compared to about a quarter for borrowers in the top income quintile.
By the first half of 2019, borrowers were spending on average between a fifth and a quarter of net income servicing mortgages, with lower income groups spending slightly less on average than higher-income groups.
When measuring the mortgage relative to residual income after reasonable living expenses, there is also a reduction relative to 2008. Lower-income borrowers exhibit the biggest improvement in resilience to potential shocks, although they still have less remaining disposable income on this measure compared to higher-income borrowers.