/Define.asp?maintable=LRM20&PLanguage=0 3 We define minimum expenditure by matching types of households in SILC to the closest minimum expenditure basket from the Vincentian Partnership Minimum Expenditure Standard of Living (MESL) data. These data are available at www.budgeting.ie 4 A threshold of 30 per cent is one of many affordability measures, for example some countries use 35 per cent limits. The question of what is a suitable measure of affordability is further discussed in Corrigan et al (2019).
The current level of the monetary policy rate in the Eurozone is low both by international and historical standards and will likely rise over the coming years. In this Article we consider what the impact of a rise in ECB policy rates would mean for the Irish mortgage market. First, we examine the structure of the Irish mortgage market in terms of interest rate contract types and explore the link between the mortgage rate and the policy rate. Second, we draw out the results of policy modelling linking arrears and interest rates using a model put forward in Slaymaker et al. (2019). We then use this model to provide some further scenarios exploring the impact of interest rate rises on the arrears rate for particular groups of Irish households. Our findings suggest a 25 basis point increase in the policy rate would lead to a 0.1 percentage point increase in new missed mortgage payments. While households are in a better economic position to withstand policy rate increases given the recovery in the labour market and in house prices, rate rises would lead to payments rising faster than long-term income growth. Younger, lower income households who are at an earlier stage in their mortgage contract are more at risk, as are households on tracker interest rates who have a contractual pass-through from the policy rate to the lending rate. 1 This research is funded under the Macroeconomy, Taxation and Banking Joint Research Programme between the Department of Finance and the ESRI. The views presented in this paper are those of the authors alone and do not represent the official views of either the Department of Finance or the Economic and Social Research Institute. Results presented in this paper are based on analysis of strictly controlled research microdata files provided by the Central Statistics Office (CSO). The CSO does not take any responsibility for the views expressed or the outputs generated from this research. Any remaining errors are our own. * 2
The mission of the Economic and Social Research Institute (ESRI) is to advance evidence-based policymaking that supports economic sustainability and social progress in Ireland. ESRI researchers apply the highest standards of academic excellence to challenges facing policymakers, focusing on 10 areas of critical importance to 21st Century Ireland.The Institute was founded in 1960 by a group of senior civil servants led by Dr T.K. Whitaker, who identified the need for independent and in-depth research analysis to provide a robust evidence base for policymaking in Ireland.Since then, the Institute has remained committed to independent research and its work is free of any expressed ideology or political position. The Institute publishes all research reaching the appropriate academic standard, irrespective of its findings or who funds the research.The quality of its research output is guaranteed by a rigorous peer review process. ESRI researchers are experts in their fields and are committed to producing work that meets the highest academic standards and practices.The work of the Institute is disseminated widely in books, journal articles and reports. ESRI publications are available to download, free of charge, from its website. Additionally, ESRI staff communicate research findings at regular conferences and seminars.The ESRI is a company limited by guarantee, answerable to its members and governed by a Council, comprising up to 14 members who represent a crosssection of ESRI members from academia, civil services, state agencies, businesses and civil society. The Institute receives an annual grant-in-aid from the Department of Public Expenditure and Reform to support the scientific and public interest elements of the Institute's activities; the grant accounted for an average of 30 per cent of the Institute's income over the lifetime of the last Research Strategy. The remaining funding comes from research programmes supported by government departments and agencies, public bodies and competitive research programmes.
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