The Central Statistics Office (CSO) released Impact of COVID-19 on the Debt Sustainability of Irish Households. This report is a Frontier Publication, which uses new methods and data sources to provide insights into Irish society using data sets from administrative systems. It is the outcome of a joint research collaboration between the CSO and the Central Bank of Ireland, working together to provide timely, policy-relevant information on the wider economic effects of COVID-19.
This report examines the extent to which households’ gross income were affected by the COVID-19 labour market shock and the impact selected COVID-19 income support schemes had on the income and the debt sustainability of households. The COVID-19 labour market shock is concentrated amongst lower income households. Without COVID-19 income supports household incomes in the bottom half of the distribution would have fallen significantly in the year to Q2 and Q3 2020.
Main results in the report are:
Change in Household Income
- The COVID-19 labour market shock affected the lower half of the income distribution most significantly with falls in household income, without COVID-19 income supports, of between 18% and 30% in the bottom half of the distribution in the year to Q2 2020, compared to falls of between 7% and 18% in the top half of the distribution in Q2
- The estimated ‘gap’ between income growth with and without supports for lower income households (bottom half of the distribution) was between 14 and 26 percentage points in Q2 2020, while the ‘gap’ for the top half of the distribution was between 5 to 16 percentage points
Debt Sustainability
- Debt-to-income ratios increased by larger amounts for more indebted households. For example, the debt-to-income ratios of the 90th percentile household increased from 342.0% to 376.1% of income from Q1 to Q2 2020. Without income supports, the increase would have been considerably larger, bringing the ratio up to 552.3% of income
- Debt-to-income ratios of mortgage debt for households increased to 152.9 in Q2 2020 and fell to 150.9 in Q3. Without income support the ratio would have been 171.0 in Q2 and 156.6 in Q3
- Debt-to-income ratios of mortgage debt for the most indebted households (90th percentile) increased from 390.0 to 432.7 per cent of income, with income supports, in Q2 2020. Without the COVID-19 income supports, the debt-to-income ratio would have been 665.0% for the 90th percentile in Q2, 6.65 times the values of the mortgage
- Debt-service levels of Household Main Residence debt increased by 0.6 percentage points to 14.8% for the median household in Q2 2020, before falling slightly in Q3. Without COVID-19 support income this debt service ratio would have increased 2.9 percentage points to 17.1% of gross household in the Q2