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This publication is categorised as a CSO Frontier Series Output. Particular care must be taken when interpreting the statistics in this release as it may use new methods which are under development and/or data sources which may be incomplete, for example new administrative data sources.
The Central Statistics Office (CSO) Frontier Publication entitled ‘Household Mortgage Affordability Analysis 2020 - 2023’ uses data from the CSO’s Household Finance and Consumption Survey (HFCS) 2020 combined with administrative data sources on employment income, selected COVID-19 income supports, social welfare transfers and household debt. The HFCS is the official sources of household finance statistics in Ireland with statistics on household assets and liabilities, gross income and credit constraints currently available for 2013, 2018 and 2020. This analysis combines 2020 HFCS microdata at the individual and household level with administrative income data and mortgage debt data for the period H1 2020 to H1 2023. This allows the estimation of changes in gross household income, debt repayments and debt service ratios by the income distribution and mortgage type over this period. This provides insight into the impact interest rate and income changes have had on household finances in recent years.
This analysis is enabled by the linking of HFCS 2020 microdata to administrative data sources by the CSO for statistical purposes using a Protected Identifier Key (PIK), in line with the Statistics Act, 1993 and the CSO Data Protocol.
The administrative data sources matched to HFCS 2020 microdata include:
Before using personal administrative data for statistical purposes, the CSO removes all identifying personal information including the Personal Public Service Number (PPSN). All data sources are pseudonymised prior to linking. The PPSN is a unique number that enables individuals to access social welfare benefits, personal taxation and other public services in Ireland. The CSO converts the PPSN to a Protected Identifier Key (PIK). The PIK is an encrypted and randomised number used by the CSO to enable linking of records across data sources and over time which is internal to the CSO. Using the PIK enables the CSO to link and analyse data for statistical purposes, while protecting the security and confidentiality of the individual data. All records in the datasets are anonymised and the results are published in the form of statistical aggregates which do not identify any individuals.
The Household Finance and Consumption Survey (HFCS) is a household survey which collects data on household consumption and finances. It covers areas such as demographics, real and financial assets, liabilities, consumption and saving, income and employment, future pension entitlements, intergenerational transfers, gifts and attitudes to risk. The main aim of the survey is to gather micro-level, structural information on households’ assets and liabilities in the Euro area.
The HFCS 2020 data was collected directly from a sample of private households selected proportionally from the entire population of private households divided into strata defined by 26 counties and 5 bands of deprivation/affluence. Additional households were selected from areas with relatively high home ownership rates and high average Local Property Tax (LPT) bands. This oversampling is common in surveys of this nature since wealth is highly unevenly distributed. There were 6,020 respondent households and a response rate of 41.5% when all sampled households are considered.
Administrative sources of personal income were used in the analysis to replicate the HFCS income components for the period from the first half (H1) of H1 2020 to H1 2023. Where no administrative data source for income components were available for a household, HFCS personal and household income data were used instead. Self-employment income from HFCS 2020 was trended forward to H1 2023 based upon the sectoral trends in self-employed employment numbers of actual hours worked from the Labour Force Survey.
Administrative sources of debt value, debt repayment amounts, interest rates and mortgage type from the Central Credit Register are matched to HFCS 2020 allowing the analysis of these components for the period H1 2020 to H1 2023.
The Revenue Commissioner’s PAYE Modernisation (PMOD) employer-employee payroll returns. PMOD has been operational in the State since 1 January 2019. This data provides information in ‘real-time’ and at payslip level on employee pay, deductions, pension contributions, tax liability, amongst other topics submitted by their employer.
Revenue’s Temporary Wage Subsidy Scheme (TWSS) enabled employees, whose employers are affected by the COVID-19 pandemic, to receive supports directly from their employer through the payroll system. The scheme operated in two phases. A transitional phase from 26 March to 3 May and an operational phase from 4 May to 31 August 2020.
Revenue’s Employment Wage Subsidy Scheme (EWSS) replaced the TWSS and became operational from 1 September 2020. The EWSS is an economy-wide enterprise support that focuses primarily on business eligibility. The scheme provides a flat-rate subsidy to qualifying employers based on the numbers of eligible employees on the employer’s payroll and gross pay to employees.
The COVID-19 Pandemic Unemployment Payment is available to employees and the self-employed who have lost their job on or after 13 March 2020 due to the COVID-19 pandemic. It was operated by the Department of Social Protection from March 2020 to March 2022.
Social transfers to persons and households from the Department of Social Protection’s payments file was utilised to estimate unemployment payments, public pension payments and other social transfer payments to persons.
The Central Bank’s Central Credit Register provides data on individuals’ debt amounts, debt repayments, loan type and interest rates. The debt values and loan details of the last month of each half year was utilised to represent the debt values of the half year period.
The Statistics Act, 1993 provides that the CSO may obtain information from public bodies including the Central Bank. The Central Credit Register (CCR) is a mandatory database of credit information established by the Central Bank, under the Credit Reporting Act 2013 as amended (‘the Act’). Under the Act, lenders are obliged to submit credit information and personal information on loans of €500 or more to the CCR. Commencing in October 2021, in line with Data Protection obligations and principles, the CSO receives CCR data transfers from the Central Bank. These transfers contain the necessary data fields required for the production of some debt related statistical outputs.
The supplementing of HFCS survey data with the CCR has increased debt participation by approximately 15 percentage points and is a marked improvement in data quality compared to previous instances of the HFCS.
The process by which administrative data sources were linked with each other and to the HFCS is outlined below. This process was undertaken for the data for each half year from H1 2020 to H1 2023.
1. Employee earnings data from PMOD was merged with COVID-19 wage subsidies data (TWSS and EWSS) by employee, employer and pay date. This was summarised by employee to give total earnings and COVID-19 wage subsidies (for relevant periods) per employee for each half year.
2. DSP Payments data was summarised by person to get the total value of unemployment payments, Pandemic Unemployment Payments (PUP), public pension payment and other social transfers payment received from the DSP by each person in each half year.
3. The PMOD and social transfers data were matched to the HFCS 2020 microdata file by person to give total earnings and social protection income per person for each half year.
4. The administrative income data were annualised and were supplemented by income components from HFCS 2020. Each of the income and debt variables were summarised at the household level to allow for the estimation of aggregate and distributional income and debt statistics.
5. Administrative data on individual’s debt, debt repayments, mortgage type and interest rate from the Central Credit Register were matched at a personal level to the HFCS 2020 micro data.
Employee Earnings: Earnings from Revenue’s PAYE Modernisation (PMOD) employer-employee payroll dataset is summarised at the employee level to create gross earnings per employee.
COVID-19 Support Income: TWSS and EWSS subsidy amounts paid via the employer and PUP payments received from DSP are summarised per person.
Employee Earnings & COVID-19 Support Income: Employee earnings plus COVID-19 support income, where applicable. Persons with COVID-19 support income and not employee earnings are included in this dataset.
Self-Employed Income: Gross self-employment income (profits/losses of unincorporated enterprises) from HFCS were used as the basis for estimating self-employed income from H1 2020 to H1 2023. The 2020 self employed income of each person is trended forward based upon the half year trends in the Labour Force Survey (LFS) sector estimates of self-employment numbers of actual hours worked.
Gross Income from Public Pensions: Pension payments received from DSP is summarised by person and quarter.
Gross Income from Occupational and Private Pension: HFCS 2020 values for gross income from occupational and private pension per person are utilised in each quarter H1 2020 to H1 2023.
Gross Income from Unemployment Benefits: Unemployment benefits payments from the DSP was summarised by person and half year.
Personal Income: Sum of all personal income components per person.
Gross Income from Regular Social Transfers: Other Social transfer payments from the Department of Social Protection was summarised by person and quarter.
Other Household Income: HFCS 2020 values for the below other sources of household income were utilised in each quarter H1 2020 to H1 2023. The other sources of household include: Regular private transfers; Financial assistance received from relatives and friends; Gross rental income from real estate property; Gross income from financial investments; Gross income from private business other than self-employment; and Gross income from other income sources
Gross Household Income: For each quarter H1 2020 to H1 2023 the above personal and household incomes were summarised by household to produce estimated gross household income values for each household per half year. These are nominal values and were not adjusted for inflation. Half year gross household income was multiplied by 2 to get an annual equivalent value to create an income value comparable to annual debt values.
Households can have a variety of debt types which are be categorised into the following debt components:
In this analysis mortgages on Household’s Main Residence are the only type of debt that is utilised.
Mortgage on Household Main Residence relate to mortgage debt specifically related to the households primary residence. This debt type is the primary focus of this analysis. Household may have multiple mortgages related to their HMR.
Mortgage on Other Property Types relates to those mortgage debts that relate to properties that are not the HMR. These include Buy-to-let properties, rental properties, holiday homes etc. These mortgages are not included in this analysis.
This is the ratio between the Household Main Residence mortgage debt service repayments of a household to the income of that household, for households with mortgage debt. Households with zero income are excluded from the calculation. This is the primary statistic used in this analysis.
This is a common concept used in this report. The median value is the value below which 50 per cent of the observations lie. Because financial and income data is often highly skewed, it is often preferred as a measure compared to the mean, which may be affected by a small number of very high values.
Identifying the median debt service to income ratio involves ranking each household (with a mortgage on the household’s main residence) from lowest to highest based on the proportion of their gross household income required to service their monthly mortgage payment. We then select the households with the mid-point or median value.
The debt or income quintile groups are five equal-sized groups of households, each group containing 20% of households. The 20% of households with the lowest income in the first quintile and 20% of households with the highest income in the fifth quintile.
A household is defined as a person living alone or a group of people who live together in the same private dwelling and share expenditures, including the joint provision of the essentials of living, such as catering arrangements. The household members defined in this fashion are usually, but not necessarily, related by blood or by marriage. Any other individual or group of people living in the same dwelling constitutes a separate household.
To analyses the distribution of households across the range of debt repayments the debt service to income ratio are grouped into five percentage point bands:
To assess the impact of interest rate and income changes on the household mortgage affordability of households only households who had household debt for the whole period were retained in the analysis. This removed those households who took out a mortgage during the period H1 2020 to H1 2023, who previously did not have a mortgage and those households who paid off their mortgage debt at some point during the analysis period. This panel analysis removes the affect of new entrants to and leavers from the household mortgage market.
The classifications used in this analysis are based upon data from administrative income data from the Central Credit Register. Classifications used in the analysis include:
Mortgage Type: The Central Credit Register categorises each mortgage into a number of mortgage types. The debt service to income ratios of households are presented by these mortgage type, these are:
The composition of households in each mortgage type group can change during the period. For example, at the commencement of the analysis period a household may have had a variable rate mortgage, which may have been changed to a fixed-rate mortgage at some point. In the analysis this household would have been categorised as part of the variable rate mortgage type for the start of the period and as a fixed-rate mortgage type after they changed mortgage type. These compositional changes can effect the median debt service to income ratios produced in the mortgage groups.
To analyse movements and changes in mortgage types necessitates the focus on one single main mortgage for each household. This allows the analysis of the debt service to income ratio of households who have changed mortgage type or remained with the same mortgage type over the whole period.
Those households who moved from variable rate mortgages had, on average higher household income and thus had a lower DSI ratio than other variable rate mortgage holders. These households who changed / refinanced / restructured their mortgage from variable to fixed rate may also have changed other terms of the mortgage such as: mortgage amount, mortgage term etc., which would also reflected in the median DSI ratios presented.
Households are grouped into five equal-sized groups (quintile groups) based upon their gross household income, each group containing 20% of households. These quintile groups are based upon all housholds and not only households who have mortgage debt.
The Governing Council of the European Central Bank (ECB) sets the key interest rates for the euro area. The rate on the deposit facility, which banks may use to make overnight deposits with the Eurosystem was at it’s lowest rate of -0.5% from 18 September 2019 where it remained until July 2022. On 27th July 2022, the European Central Bank begun a process of increasing interest rates for the euro area. See here.
| The rate on the deposit facility over the analysis period 2020 to 2023 | |||
| H1 2020 | Deposit rate | 1 January to 30 June | -0.50% |
|---|---|---|---|
| H2 2020 | Deposit rate | 1 July to 31 December | -0.50% |
| H1 2021 | Deposit rate | 1 January to 30 June | -0.50% |
| H2 2021 | Deposit rate | 1 July to 31 December | -0.50% |
| H1 2022 | Deposit rate | 1 January to 30 June | -0.50% |
| H2 2022 | Deposit rate | 1 July to 27 July | -0.50% |
| 27 July to 14 Sept | 0.00% | ||
| 14 September to 2 November | 0.75% | ||
| 2 November to 21 December | 1.50% | ||
| 21 December to 31 December | 2.00% | ||
| H1 2023 | Deposit rate | 1 January to 8 February | 2.00% |
| 8 February to 22 March | 2.50% | ||
| 22 March to 10 May | 3.00% | ||
| 10 May to 21 June | 3.25% | ||
| 21 June to 30 June | 3.50% | ||
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