Research by a Central Bank economist suggests that younger borrowers are more likely to be hit by interest rate rises due to the large number of tracker mortgages taken out by this age group.

Economist Tara McIndoe-Calder looked at the mortgage debt of three age groups - younger borrowers (born after 1970), older borrowers (born before 1960) and middle borrowers (born in 1960).  

She found that younger borrowers' debt grew faster than their incomes in the three years leading up to 2008 due to very rapid house price and bank lending growth in those years.

But their debt service levels declined more rapidly than the other two groups.  

This is because around 40% of mortgages in this group are tracker mortgages, which benefit from a direct pass through of cuts in the ECB policy rate.

The research paper said a 13% decline in debt service costs between 2008 and 2014 for this age group mitigated the impact of the income shock.  

The younger group saw a fall in disposable income of 15% during this period, compared with a 10% fall for the other age groups.

In contrast, middle age borrowers saw their debt service costs rise more or less in line with income developments.

The older age group - which has the smallest percentage of tracker loans - saw a rise in debt service costs of 14% at the median, between 2009 and 2014.  

By then the debt service costs for this age group were higher than they were in 2008. 

The high rate of interest charged on standard variable loans compensates banks for the very low rate of interest they charge on tracker loans.

However, interest rates will go up.  

While the research said rising policy rates will affect all variable rate borrowers, those on tracker mortgages are more vulnerable, as they have bigger outstanding loans, and because of the almost immediate pass through of rises in the ECB policy rate.  

The Central Bank also noted that incomes are recovering more slowly among the younger age group.