Monetary Policy and the Homeownership Rate

James Graham and Avish Sharma

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Monetary policy affects not only the spending of existing homeowners, but also whether and when to become a homeowner in the first place. We study this transmission mechanism in Australia, a country with a high cost of housing, adjustable-rate mortgages, and serviceability-based borrowing constraints. We build a heterogeneous-agent life-cycle model, where the macroeconomic effects of monetary policy are due to an exogenous VAR. A contractionary shock reduces homeownership for over a decade. Homeownership dynamics depend on interest rates, incomes, borrowing constraints, and household expectations about monetary policy. Finally, the welfare costs of monetary shocks are heavily concentrated among potential homebuyers.

Keywords: homeownership; monetary policy; interest rates; house prices; heterogeneous households (search for similar items in EconPapers)
JEL-codes: E20 E52 R21 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2024-06, Revised 2026-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mon and nep-ure
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Citations: View citations in EconPapers (1)

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https://crawford.anu.edu.au/sites/default/files/20 ... 24_Graham_Sharma.pdf Revised Version (application/pdf)
https://crawford.anu.edu.au/sites/default/files/20 ... 24_Graham_Sharma.pdf Original Version (application/pdf)

Related works:
Working Paper: Monetary Policy and the Homeownership Rate (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2024-43

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