The Central Bank has published a study which provides new data on this issue.
[broken link removed].
I have only had a quick look at it, and find it very difficult to digest.
Table4 highlights the median installment, median
interest rate and median loan size for mortgages
with Tracker, SVR and fixed interest rates.
It can be observed that Tracker loans have the lowest
median installment at e756 per month while the
median installment on SVR and xed rate loans
amounted to e775 and e834 respectively. While
there are differences between these medians, they
do not appear as divergent as would be expected
considering the much lower interest rate applied
to Tracker loans. One explanation for this result
is also evident in table4. The median balance
is much higher for Tracker loans thus offsetting
some of the effects of lower interest rates.
While Tracker loans have the highest outstanding
balances, this is related to the fact that such
loans were mainly originated during the height of
the credit boom period when house prices were
highest and credit conditions were at their loosest.
In fact these loans are no longer available to
new borrowers. Thus the average balance for new
loans, which are provided on SVR or fixed rates,
is lower given the falls in house prices since 2008.
It is informative therefore to consider the differences
in financial burden for borrowers with different
mortgage interest rate contracts who took
out their mortgage in the same year. This is presented
in Figure5. Figure5:A indeed shows that for
the borrowers who took out loans during the peak
years of the credit boom (2005-2008), the difference
in installments between SVR or fixed loans
and Tracker loan is much larger than suggested
by the overall sample medians. As interest rates
are virtually identical within each rate type over
time (as seen in5:B), any variance in installments
mainly reflects dffierences in outstanding balances
across mortgage contract types over time.
Finally, to further explore the differences in financial
burdens between mortgage holders of different
rate types, we undertake the following exercise.
We ask: Are borrowers who currently live
in an identically-valued house facing a different financial
burden due the type of interest rate they
face on their mortgage? This assessment abstracts
from considerations of when the borrower took out
their mortgage and focuses more on the unit of
housing that they consume today. To answer this
question, in figure6 we plot the median installment
for borrowers with different interest rate type
mortgage contracts against the current value of
their property. The chart indicates that for properties
valued up to circa 330,000 Tracker borrowers
have lower installments relative to SVR. However,
for houses valued over 330,000 there is no difference
between the installments for SVR and Tracker
borrowers. The installments for borrowers on fixed
rate loans are higher across nearly all points of the
current house price distribution than both Tracker
and SVR borrowers.