OREANDA-NEWS. The Central Bank of Ireland today published a new Research Technical Paper 'Designing Macro-prudential Policy for Mortgage Lending; Do First Time Buyers Default Less?' (Technical Paper No. 02/RT/15).

The research paper explores whether there is a difference in mortgage default risk between First Time Buyers (FTBs) and second and subsequent buyers (SSBs).

The main findings are as follows:

  • FTBs are four percentage points or 30 per cent less likely to default than SSBs. This difference changes with the level of Loan-to-value, Loan-to-income and house price associated with the borrower’s mortgage transaction.
  • Given the differential, policy makers who are calibrating macro-prudential measures to manage risk in the mortgage market could take stock of such differences and incorporate this information into cap selection.
  • This research is consistent with differential regulatory treatment of first time buyers with default risk remaining comparable to the remainder of mortgage lending.