Housing assistance policy for mortgage borrowers: liquidity improvements or price acceleration?

Fergal McCann and Anuj Pratap Singh
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Fergal McCann: Central Bank of Ireland
Anuj Pratap Singh: Central Bank of Ireland

No 4/RT/23, Research Technical Papers from Central Bank of Ireland

Abstract: Public subsidies to support the downpayments of mortgaged home purchasers can be absorbed in the housing market in a number of ways. Using granular data on loans and borrowers in Ireland, we assess three possible transmission channels of an enhancement to subsidy payments introduced in mid-2020: borrowers’ liquidity, equity (or indebtedness), and home purchase values. Our estimates suggests that outof-pocket downpayments fall by almost the size of the increase in the subsidy value, suggesting improvement in liquidity position of eligible borrowers. We also find that this liquidity improving effect is present across all income levels, but highest in the middle of the borrower income distribution. Equity enhancements (lowering Loan-tovalue ratios) and house price increases are smaller in magnitude and more prevalent among higher income borrowers.

Keywords: Downpayment constraint; housing assistance schemes; macroprudential policy; borrower liquidity. (search for similar items in EconPapers)
JEL-codes: D04 E58 H24 R28 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-cba and nep-ure
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