A model of mortgage losses and its applications for macroprudential instruments

Christian Hott

No 34/2013, Discussion Papers from Deutsche Bundesbank

Abstract: We develop a theoretical model of mortgage loss rates that evaluates their main underlying risk factors. Following the model, loss rates are positively influenced by the house price level, the loan-to-value of mortgages, interest rates, and the unemployment rate. They are negatively influenced by the growth of house prices and the income level. The calibration of the model for the US and Switzerland demonstrates that it is able to describe the overall development of actual mortgage loss rates. In addition, we show potential applications of the model for different macroprudential instruments: stress tests, countercyclical buffer, and setting risk weights for mortgages with different loan-to-value and loan-to-income ratios.

Keywords: Mortgage Market; Credit Risk; Macroprudential Instruments (search for similar items in EconPapers)
JEL-codes: E5 G21 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: A model of mortgage losses and its applications for macroprudential instruments (2015)
Working Paper: A Model of Mortgage Losses and its Applications for Macroprudential Instruments (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:342013

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