Housing-consumption channel of mortgage demand

Gabriel M Ahlfeldt, Nikodem Szumilo and Jagdish Tripathy ()
Additional contact information
Gabriel M Ahlfeldt: Humboldt University of Berlin, London School of Economics, CEPR and CESifo
Nikodem Szumilo: University College London
Jagdish Tripathy: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 1086, Bank of England working papers from Bank of England

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 data set 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: 60 pages
Date: 2024-08-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... -mortgage-demand.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:1086

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().