After the Bubble: An Anatomy of the Irish Mortgage Arrears Crisis

The roots of the Great Financial Crisis of 2008 lie in the mortgage market. Banks, exploiting liberalised regulatory regimes, devised new funding mechanisms (i.e. securitisation) and mortgage product innovations (including but not limited to subprime loans) to expand credit flows into housing markets and extend lending among lower income households. As the global economic environment turned in 2008, the scale of debt encumbrance led to rapidly rising rates of mortgage defaults in countries subscribing to highly financialised approaches to housing provision. In Ireland, the focus of this paper, 18% of mortgages are in arrears and the value of accrued arrears exceeds €2.2bn.
A critical literature has emerged post-2008 on mortgage market ‘financialisation’ and the risks of highly-leveraged home ownership, with a particular focus on the spatial and social patterns of mortgage defaults and foreclosures. While these standard indicators of housing market stress reveal the ‘overt casualties’ of the crash, they conceal a mass of households that struggle with mortgage commitments in the context of a weak economy, moribund labour market and austerity. These ‘unrevealed casualties’ are not facing repossession, but suffer the constraints of negative equity, burdensome mortgage commitments and diminished standards of living. To examine the consequences for these ‘unrevealed casualties’ this paper draws on recent survey data of Dublin households to develop the concept of mortgage stress. Mortgage stress utilises both standard and atypical indicators of mortgage difficulty to comprehensively capture the impacts of Ireland’s property crash in a manner that aligns more closely to households’ lived experience.