Determinants of Mortgage indebtedness in Canada

Mario Fortin () and Andre Leclerc ()
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Andre Leclerc: Secteur sciences humaines, Université de Moncton, campus d’Edmundston

Cahiers de recherche from Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke

Abstract: Mortgage indebtedness has risen considerably in Canada in recent years, pushing households’ debt-to-income ratio to an all time high. In order to identify what variables explains these changes in the stock of debt, we analyze the inflow and outflow of mortgage financing. We show that the number of new mortgage loans is mostly influenced by nominal interest rates while their average value reacts only to housing price. As to the outflow of debt repayment it is sensitive to more variables. Since housing price is also strongly influenced by nominal interest rate, we show that the main driving force towards higher Canadian households’ mortgage debt is the reduction in nominal interest rate.

Keywords: mortgage demand; indebtedness; housing (search for similar items in EconPapers)
JEL-codes: G21 R21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2007

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http://pages.usherbrooke.ca/gredi/wpapers/GREDI-0711.pdf First version, 2007 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:shr:wpaper:07-11

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