Household Credit Market Report 2017 H2

The Bank published the 2017 H2 edition of the Household Credit Market Report last week. The report collates information from a wide range of internal Central Bank and external sources into one document to give an up-to-date picture of developments in the household credit market in Ireland.  It covers both mortgage and consumer credit. Among the highlights in this edition, mortgage credit grew at an annual rate of 1.4 per cent for private dwelling homes in Q2 2017 but remains negative for Buy-to-Let purposes (-8.6 per cent).  New mortgage approvals and drawdowns continued to increase in Q2 2017, with First Time Buyers continuing to account for roughly half of all approvals and drawdowns.  For the period January to June 2017, the average originating loan-to-value (OLTV) ratio on new lending for FTBs was 79.4 per cent and the average originating loan-to-income (OLTI) ratio was 3.0. The corresponding figures for Second and Subsequent Borrowers (SSBs) were 67.6 per cent and 2.5 respectively. These ratios increased slightly in comparison to the second half of 2016. On average, FTBs and SSBs borrowed €199,414 and €229,332 respectively during the period January to June 2017. In terms of consumer credit, growth remains positive at 5.4 per cent year-on-year in August 2017, reflecting growth in loans of a maturity of between 1 and 5 years.  More details from the Report can be found here.

The Irish labour market and wages

The robust performance of the Irish labour market over the past number of years offers the most tangible evidence of the recovery in the Irish economy. With unemployment falling and vacancies rising, an obvious question that arises is the extent to which the current pace of growth can be maintained. Today, colleagues in the Central Bank published a paper examining this very issue, bringing together a range of labour market indicators to assess the current state of play including prospects for wages over the short-term. We also revisit Okun’s law and the Phillips curve drawing on the latest Irish data. We hope that this research proves useful as 2017 draws to a close. The paper is titled ‘The Labour Market and Wage Growth after a Crisis’ and can also be accessed by clicking this link.

Upcoming Conference: Macroeconomic Effects of Policy Announcements, 5 and 6 October

The Central Bank of Ireland is organising a workshop on the effects macroeconomic policy announcements have on agents’ expectations and their actions. The main focus is on the Dynamic, Stochastic General Equilibrium (DSGE) macroeconomic models used for policy analysis. The workshop will take place on 5 and 6 October, 2017 in Dublin.

Expectations of households and firms regarding future monetary and fiscal policies have been at the heart of macroeconomic policy debates at least since the 1970s, most notably in the context of how to limit the costs of disinflations. Since the financial crisis and the European sovereign debt crisis, policymakers aiming to stabilise inflation and economic activity had to rely even more on their ability to influence the expectations of the private sector. As short term interest rates hit the zero lower bound, some central banks aimed to influence long term rates by announcing the future path of the policy rate, and also tried to affect long term rates more directly by means of asset purchases. Similarly, the key rationale behind fiscal policy measures taken during the crisis and the accompanying structural reforms was that their favourable effect on the expectations of households and firms would counterbalance direct contractionary effects. This workshop aims to be a forum for recent contributions analysing the current macroeconomic effects of future policy changes or long term plans.

 The programme can be found here:

 Programme – Macroeconomic Effects of Policy Announcements FINAL.


Paper on the recovery in the public finances following the crisis

Next Thursday (May 25) I will present a paper to The Statistical and Social Inquiry Society of Ireland (SSISI) on the recovery in the public finances following the financial crisis. The meeting takes place at the Royal Irish Academy on Dawson Street at 5.30pm. Details (including the paper) are available on the SSISI website here.


Housing-related taxation receipts

In recent years, the summer period has become a boom time for those with an interest in the public finances. The past few weeks have seen a number of releases in the area including the Government’s Summer Economic Statement and IFAC’s Fiscal Assessment Report. The upcoming National Economic Dialogue will also spur debate in advance of Budget 2017.

With this in mind, readers might be interested in recent work published by myself and Kieran McQuinn (ESRI) in the Journal of European Real Estate Research examining the sustainable nature of housing related taxes in Ireland. Using a 3 pronged modelling approach we quantify the extent of housing related tax windfall gains and losses over a 30 year period as a result of disequilibrium in the housing market. We find that the fiscal position compatible with equilibrium in the housing market has at times diverged greatly from actual outturns both during the boom, the collapse and in the subsequent recovery.

The paper highlights the role played by the housing market in influencing the tax take and above all points to the need for a more granular approach to be taken in tax forecasting within Ireland. A link to the paper can be found here: with an older working paper version available here: