Model-based estimates of the resilience of mortgages at origination

Using a probability of default model estimated over the period 2008-2015 for Irish mortgages, this Letter provides model-based estimates of the resilience of mortgages at origination. Cohorts of loans issued with lower aggregate probabilities of default based on their originating characteristics are deemed to have been more resilient at origination. We compare each annual cohort of loans issued from 2003 to 2016, differentiating between loans issued in 2015 that were within and outside the scope of Central Bank of Ireland mortgage market regulations. The results suggest that at-origination resilience was deteriorating in the Irish mortgage market from 2003 to 2008, before improving significantly in 2009 and 2010. The post-crisis period was characterised by increases in portfolio probability of default for the 2011 to 2014 cohorts, while the model suggests that resilience has improved relative to previous years for mortgages issued in 2015 and 2016.