Choice of mortgage instrument, liquidity constraints and the demand for housing debt in the UK

David Leece

Applied Economics, 2000, vol. 32, issue 9, 1121-1132

Abstract: The research uses microdata to estimate reduced form mortgage demand equations based on truncated regressions, dissagregated by choice of mortgage instrument. The choice is between a standard annuity mortgage and a balloon type mortgage (the endowment). The estimates are used to indicate the differential impact of credit market rationing and financial liberalization on households. The results indicate significant variations in mortgage demand by choice of mortgage instrument. Econometric testing demonstrates that the choice between an endowment and a repayment mortgage can be used as an exogenous indicator of liquidity and portfolio positions and different user costs of owner occupation.

Date: 2000
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DOI: 10.1080/000368400404263

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