The explosive growth of subprime mortgage lending in recent years was yet another facet of the broader credit boom. Expanding access to homeownership is an important social goal, and responsible subprime lending is beneficial for both borrowers and lenders.
This is because sharp increases in NPLs can weaken macroeconomic performance, and can activate a spiral that exacerbates macro-financial vulnerabilities leading to reinforcing downward effects between banking system distress and deteriorating economic activity.4 Economic growth in some parts of the euro area, including Ireland, continues to be hindered by the debt undertow resulting from the recent crisis.