Financial Stability Note: Residential property price segments and mortgage finance

20 November 2018 Press Release

Houses in a Row

A Financial Stability Note by Edward Gaffney examines the share of mortgage finance in different price segments of the property market between February 2015 and June 2018. The research classifies residential property sales in to ten categories of equal size in increasing order of price, known as ‘deciles’. It finds substantial differences in residential mortgage finance among the different market segments.

The key findings of the Financial Stability Note are:

  • Banks typically lend to finance property purchase at higher prices, while non-mortgage finance is dominant at lower prices. The mortgage share rises from 5% in the first decile to 72% at the ninth decile. At the tenth decile, the trend reverses as mortgages become less dominant.
  • Prices grew more readily at the lower end of the market, by up to 15% per year among the bottom three deciles, compared to 6% among the top three deciles.
  • The variation in mortgage share therefore acts as a structural limit to the influence of the Central Bank of Ireland’s mortgage measures on price growth.

The views expressed in this Note are those of the author alone and do not represent the official views of the Central Bank of Ireland.

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