Fallout for lowest income households from mortgage rate hikes 'matter of concern'

CSO figures show median debt service ratio for households with the lowest gross incomes increased sharply as interest rates rose

Christine Lagarde, president of the European Central Bank (ECB): The ECB has its December meeting on Thursday Picture: Arne Dedert/dpa via AP

Official figures showing a sharp rise in costs of paying mortgages are worrying as they suggest the lowest income households face the worst fallout on their finances, Paul Joyce, senior policy adviser at the Free Legal Advice Centres, or Flac, has warned.  

The Central Statistics Office analysis through to the end of June showed the median debt service ratio for households with the lowest gross incomes increased sharply, to almost 41% from 32% of their household income, as interest rates rose. 

"Our research found that households with tracker rate mortgages and the 20% of households with the lowest gross household income were most significantly impacted by interest rate changes in the second half of 2022 and the first half of 2023," CSO statistician Brian Cahill said in a commentary. 

The European Central Bank started hiking interest rates in July 2022 and last increased rates at its meeting in late September. The bank meets on Thursday for its December meeting. 

"The figures are a matter of concern because the lowest income has the least room for manoeuvre, and this is before taking into account the pressure from other household bills, including grocery and food bills," Mr Joyce said. 

Households face many more debts other than mortgage debt repayments, he said. 

Studies by Mr Joyce for Flac earlier this year revealed the huge issues facing households with unsecured debt, including rents and personal loans. 

Mr Joyce welcomed the CSO survey, urging the authorities to collect more official data on rentals and unsecured debt.