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Consumption and Initial Mortgage Conditions: Evidence From Survey Data

Giacomo Masier () and Ernesto Villanueva ()

No 52, BCL working papers from Central Bank of Luxembourg

Abstract: Economic theory predicts that the consumption path of unconstrained homeowners responds to the interest rate, while the consumption path of credit constrained homeowners is determined by the size and timing of payments (mortgage maturity). We exploit the rapid expansion of mortgage markets during the last decade in Spain and a very detailed survey on household .nances to estimate group-speci.c consumption responses to changes in the credit conditions. Our estimates suggest that the consumption of households headed by an individual with high school responds more to mortgage maturity than to the interest rate spread. The consumption of the rest of indebted households is insensitive to loan maturity. Those results are con.rmed when we instrument loan maturity exploiting the fact that banks are reluctant to o¤er contracts with age at maturity above 65. An interpretation of those results is that households headed by middle education individuals, 8% of our sample, behave as credit constrained.

Keywords: Credit constraints; mortgages; household consumption (search for similar items in EconPapers)
JEL-codes: D91 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2011-02
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (3) Track citations by RSS feed

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https://www.bcl.lu/fr/Recherche/publications/cahiers_etudes/52/BCLWP052.pdf (application/pdf)

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Working Paper: Consumption and initial mortgage conditions: evidence from survey data (2011) Downloads
Working Paper: Consumption and initial mortgage conditions: evidence from survey data (2011) Downloads
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