Press Statement

Preasráiteas

23 February 2021

Go to release: Impact of COVID-19 on the Debt Sustainability of Irish Households Q3 2020

The Central Statistics Office (CSO) has today (23 February 2021) 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 datasets 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.

Commenting on the release, Brian Cahill, Statistician, said:

"This publication presents analysis of the impact the COVID-19 crisis has had on the incomes of Irish households and their ability to sustain their debt commitments in the first three-quarters of 2020. This experimental piece of analysis is based upon data from the CSO’s Household Finance and Consumption Survey (HFCS) combined with administrative data sources of income and COVID-19 income supports from the Revenue Commissioners and the Department of Social Protection, which was carried out under the auspices of the Statistics Act, 1993.

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. Higher income households would have seen their income without supports fall to a lesser, but not insignificant, extent.

Across all households, when COVID-19 income supports are included, there is a relatively consistent pattern of year-on-year income declines in Q2 2020, followed by positive changes in the year to Q3. There is, however, considerable variation across characteristics. Those household types with the largest “gap” between their year-on-year income change with supports and without supports include: single adult households with children under 18, households with younger reference persons (under 30 years); and households that are rented.

While lower income households had the largest relative benefits from COVID-19 income supports, the households that benefitted most in terms of their debt sustainability included households with high debt levels; owner-occupied households with mortgage debt; households with two or more adults with children under 18 years; and households with a reference person aged 30 to 65 years."

Other main results include:

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 90^th 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

Editor's Note:

The CSO Frontier Publication entitled ‘Impact of COVID-19 on the Debt Sustainability of Irish Households’ uses data from the CSO’s Household Finance and Consumption Survey (HFCS) 2018 combined with administrative data sources on income and selected COVID-19 income supports. The analysis is an experimental piece where new methods and data sources are used and analysed to provide timely, policy relevant information and insight on the wider economic effects of COVID-19. The analysis combines 2018 HFCS data with administrative data for the period Q1 2019 to Q3 2020.  This allows the estimation of changes in gross household income and debt ratios by household characteristics, household reference person and by distribution over this period. Income and debt developments are estimated both with and without selected COVID-19 income supports. 

Please Note: The data included in this publication are subject to revision as more information relating to earnings and income are updated by the Revenue Commissioners or Department of Social Protection and the data is subsequently made available to the CSO for statistical analysis purposes.

Users should see the Background Notes for information on the methodology and definitions used in the analysis.

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