ZAI 1 “Casa de la Majadilla, Collado de la Celada y Cerro Fortificado”

Turning to the liability side of the household balance sheet, this section looks at the percentage of households holding different types of debt, the median outstanding balances and the burden this places on the household relative to income and assets. Table 4.1 shows the proportion of households with any debt and then divides this debt into four categories: HMR mortgage debt, mortgage debt secured by other residential property, mortgage debt secured on non-

residential property (e.g. farmland, business premises) and non-mortgage debt (personal loans and credit card debt). Over half of households (56.8 per cent) have some type of debt outstanding, with one-third having mortgage debt on their HMR, 4.3 per cent having a mortgage on other residential property and 2 per cent having debt on non- residential property. In addition, over 41 per cent of households report holding some non- mortgage debt.

Not surprisingly, households owning their HMR outright are the least indebted and, along with having no mortgage on their main residence, Table 4.1: Participation in debt, by household characteristics

Any debt HMR Mort Non-HMR

Residential Mort Other prop mort Non-mort debt Total 56.8 33.9 4.3 2.0 41.4 Housing status Owner-outright 29.2 0.0 3.7 2.6 25.1 Owner-with mort 100.0 100.0 6.2 2.8 60.1 Renter or other 41.5 0.0 3.0 0.3 40.3 %tile of income less than 20 35.0 12.1 0.6 0.7 28.7 20-39 41.9 16.8 1.1 1.3 33.7 40-59 58.3 32.2 2.0 0.7 45.7 60-79 69.2 47.1 4.0 2.1 50.5 80-100 79.6 61.1 13.8 5.1 48.6

%tile of net wealth

less than 20 71.9 43.6 6.8 1.1 58.9 20-39 48.9 20.6 1.0 0.3 40.9 40-59 61.0 45.4 2.3 0.7 41.9 60-79 51.3 32.4 4.2 0.6 33.9 80-100 50.9 27.4 7.3 7.2 31.7 Age HRP 18-34 59.4 27.3 2.5 0.9 49.4 35-44 75.5 57.1 7.2 2.5 49.8 45-54 72.6 50.2 6.0 3.2 49.8 55-64 52.6 26.7 4.2 2.6 39.6 65-74 27.7 5.3 1.9 1.3 23.3 75+ 11.2 1.2 0.5 0.1 9.4 Work status HRP Employee 71.2 48.0 5.8 1.6 50.2 Self-employed 68.2 44.4 9.4 10.9 43.7 Retired 22.9 5.7 2.1 0.3 18.5

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The Financial Position of Irish Households

they are also the least likely to have non- mortgage debt. Households with a mortgage on their main residence are the most likely to also have other outstanding debts, both on other properties (8.3 per cent) and unsecured debt (60.1 per cent).

The previous section showed a fairly consistent pattern of asset participation and value increasing across both income and wealth groups. Looking at debt however we see that these relationships work in opposite directions, with debt participation increasing in income quintiles but not in wealth quintiles. Households in the highest income quintile are more than twice as likely to have some outstanding debt compared to those in the lowest quintile (79.6 per cent and 35 per cent respectively). This relationship applies to all four categories of debt. Lower income households are relatively unlikely to have mortgage debt on either a HMR or other properties. Non-mortgage debt, on the other hand, is accessed on a more even basis across the income groups. This is shown further in Figure 4.1.

In contrast to the increasing pattern across income groups, Table 4.1 shows that higher wealth households are less likely to have outstanding mortgage debt on their HMR or to have unsecured debt. The higher wealth group are however the most likely to have debt on other (i.e. non-HMR) properties.

We saw in the previous section that assets tended to be accumulated with age. Figure 4.2 shows that the opposite pattern is associated with debts. Sixty per cent of households whose reference person is in the youngest age bracket (between 18 and 34) have some outstanding debt, with this most likely to be unsecured debt. Households in the next two age categories (35-44 and 45-54) are the most likely to be indebted, with three- quarters having some type of debt and over half having outstanding mortgages associated with their HMR. As the household ages, debt participation rates fall considerably, particularly for HMR mortgage debt (owed by 5.3 per cent of those aged 65-74). The only type of debt that does not have a strong life-cycle component is mortgage debt on non-HMR property which is relatively smoothly spread

75+ 65-74 55-64 45-54 35-44 18-34 0.0 0.2 0.4 0.6 0.8 1.0 Non-collateralised debt Other mortgages HMR mortgage Total debt

Figure 4.2: Debt participation, by age Fraction of households having debt

Source: HFCS (2013). 0.0 0.2 0.4 0.6 0.8 1.0 Non-collateralised debt Other mortgages HMR mortgage Total debt 10 9 8 7 6 5 4 3 2 1

Figure 4.1: Participation in debt, by income decile Fraction of households having debt

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over age groups, but is also the least common type of debt overall.

The pattern of debt participation across age categories is further reflected in the results by work status, where households with a retired reference person are the least likely to have any outstanding debt. Self-employed households are somewhat less likely to have outstanding HMR mortgage debt or unsecured debt relative to households headed by an employee. Consistent with their greater likelihood of owning other types of property (both residential and non-residential), the self- employed also have a greater probability of having outstanding mortgage debt on non- HMR properties.

Just over half of households where the reference person is not working (but not retired) have some outstanding debt, with over one-quarter having mortgage debt on their HMR and over 40 per cent having other non- mortgage debt. This is suggestive of high debt repayment burdens for these households if these loans were taken out before a job loss or other income-reducing event.

The asset side of Irish household balance sheets is more concentrated in real assets than those of other euro area countries. Given the house price boom and credit expansion up to 2008, it is unsurprising to find that Irish households are more indebted than the euro area average and this is particularly striking in the case of HMR mortgage debt. Table 4.2 shows the comparison of debt participation rates across Euro members for total debt and three subcomponents (HMR mortgages, other property mortgages and non-mortgage debt – information on mortgages secured on residential and non-residential property were not separated in the Euro-area aggregates). Irish households are considerably more likely to have higher outstanding debt relative to the euro area average (56.8 per cent of households in Ireland relative to 43.7 per cent in other countries). One-third of Irish households have mortgage debt associated with their HMR, compared to 19 per cent of households in the rest of the euro area. Only one country has a higher percentage of households with HMR mortgage debt (Netherlands). The incidence of other property Table 4.2: Participation in debt, cross-country comparison

Any debt HMR Mort Other prop mort Non-mort debt

Ireland (2013) 56.8 33.9 5.9 41.4

Euro area (wave 1) 43.7 19.0 5.6 29.3

Belgium (2010) 44.8 28.5 3.2 24.2 Germany (2010) 47.4 18.0 6.0 34.6 Greece (2009) 36.6 13.9 3.9 26.1 Spain (2008) 50.0 26.8 7.3 30.7 France (2010) 46.9 16.9 10.1 32.8 Italy (2010) 25.2 9.6 1.6 17.8 Cyprus (2010) 65.4 35.0 15.4 47.9 Luxembourg (2010) 58.3 32.8 8.4 36.9 Malta (2010) 34.1 12.1 4.5 25.2 Netherlands (2009) 65.7 43.9 2.5 37.3 Austria (2010) 35.6 16.6 2.4 21.4 Portugal (2010) 37.7 24.5 3.3 18.3 Slovenia (2010) 44.5 12.5 1.6 38.9 Slovakia (2010) 26.8 9.3 0.6 19.9 Finland (2009) 59.8 32.8 M M

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debt is more in line with the euro area average, but Irish households are also considerably more likely to have non-mortgage debt (41.4 per cent) compared to other countries (29.3 per cent). Participation rates in non-mortgage debt are the second-highest of all countries surveyed, with only Cyprus having a higher incidence of this type of debt.

From participation rates, we turn to the amount of debt outstanding for those households that have debt. The median values of debt (conditional on having debt) are shown in Table 4.3. Although non-mortgage debt was the most common type of debt held by

households, the median amounts are low relative to those relating to secured debt. The median HMR mortgage amount stands at €129,000 per household; for other residential property mortgages it is €157,000; for non- residential mortgages it is a median of €99,000 and for non-mortgage debt it is of €3,900 per household.

Debt amounts outstanding are highest for those households with a current mortgage on their main residence; these households have median debts of €141,700. Households owning their homes outright have median outstanding debts of €5,000 and renters owe Table 4.3: Median value of debt (€, ‘000s) Conditional on Participation

Any debt HMR Mort Non-HMR

Residential MortOther prop mort Non-mort debt

Total 63.0 129.0 157.0 99.0 3.9