The Amortization Elasticity of Mortgage Demand

Claes Bäckman and Peter van Santen (p.c.van.santen@gmail.com)
Additional contact information
Peter van Santen: Faculty of Economics and Business, University of Groningen, Postal: Universiteitscomplex, 9747 AJ Groningen, Netherlands

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We study how amortization payments affect household borrowing exploiting notches in the Swedish amortization requirement. We argue that amortization payments are costly for borrowers under a number of scenarios, and that they therefore affect credit demand. We provide causal evidence that a percentage point increase in amortization payments reduce LTV ratios by 2-3 percentage points, implying a sizable amortization elasticity of mortgage demand. Borrowers who seek to avoid making payments generally have higher debt, higher income and higher debt-to-income ratios. On the aggregate level, credit growth falls sharply after the introduction of the amortization requirement.

Keywords: Amortization requirements; Macroprudential policy; Household debt (search for similar items in EconPapers)
JEL-codes: E21 E6 G21 G51 (search for similar items in EconPapers)
Pages: 52
Date: 2020-11-16
New Economics Papers: this item is included in nep-acc, nep-ban, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.econ.au.dk/repec/afn/wp/20/wp20_16.pdf (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:aah:aarhec:2020-16

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by (bhoejklint@econ.au.dk).