A new paper by Richard Waldron and Declan Redmond on the mortgage crisis in Ireland has just been published in the journal Housing Studies.
The Extent of the Mortgage Crisis in Ireland and Policy Responses
From the mid-1990s, Ireland experienced a property bubble, fuelled by deregulation in the banking sector and government commitment to expanding home ownership. However, since 2007, the situation has dramatically reversed. The banking system and property market have
collapsed and pushed the Irish state into insolvency. National house prices have fallen by 50 per cent from the peak in 2007, whereas incomes have contracted and the unemployment rate has increased. This has produced a serious situation regarding negative equity and mortgage arrears, a problem highlighted by the former U.S. President Bill Clinton on a visit to Ireland in 2011. This paper examines government responses to the mortgage crisis, particularly their emphasis on mortgage forbearance and reform of Ireland’s bankruptcy legislation. An overview of the drivers of the bubble and the extent of negative equity and arrears is provided firstly. In conclusion, the paper reflects upon the implications of the crisis for the homeownership model that Ireland has followed for the last two decades.
KEY WORDS: Ireland, mortgage market expansion, mortgage crisis, forbearance, restructuring