The causal effect of house prices on mortgage demand and mortgage supply

Christoph Basten and Cathérine Koch
Authors registered in the RePEc Author Service: Catherine Tahmee Casanova

No 140, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: We identify the causal effect of house prices on mortgage demand and supply in Switzerland by exploiting exogenous shocks to immigration and thereby to house prices. Detailed micro data allow us to observe multiple offers for each mortgage request. We find a 1% increase in house prices to raise the requested mortgage amount by 0.52%. Due to positive feedback effects, the entire partial correlation is 0.78%. While we find higher house prices to increase mortgage demand, they induce banks to make fewer offers and charge higher rates, especially later in the boom and especially for highly leveraged households.

Keywords: House prices; mortgage demand; mortgage supply; instrumental variables (search for similar items in EconPapers)
JEL-codes: D14 G21 J61 R21 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-ban and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:zur:econwp:140

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