Housing-consumption channel of mortgage demand

Gabriel M. Ahlfeldt, Nikodem Szumilo and Jagdish Tripathy

No 44, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: We quantify the housing-consumption channel in mortgage demand according to which households borrow more following house-price increases since housing and non-housing consumption are imperfect substitutes. To identify this channel, we take a structural approach to mortgage demand and supply, exploiting exogenous variation in house-price growth and a unique dataset with matched transaction- price and mortgage information. We estimate an elasticity of mortgage borrowing to house-prices of 0.82. Counterfactual analysis of the general-equilibrium of housing and mortgage markets shows that, sans housing-consumption channel, mortgage and house-price growth in the UK would have been 50% and 31% lower, respectively, since the 1990s.

Keywords: House prices; mortgage demand; housing consumption; consumption channel; property taxes (search for similar items in EconPapers)
JEL-codes: G11 G21 R21 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2024-08-02
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0044

DOI: 10.48462/opus4-5572

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