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Consumption effects of mortgage payment

Bruno Albuquerque () and Alexandra Varadi ()
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Alexandra Varadi: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 963, Bank of England working papers from Bank of England

Abstract: We use UK transaction-level data during the Covid-19 pandemic to study whether mortgage payment holidays (PH) can act as a mechanism for smoothing household consumption following negative aggregate shocks. Our results suggest that mortgage PH were accessed by both households with pre-existing financial vulnerabilities and by those with stronger balance sheets, including buy-to-let investors. We also find that the temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those non-eligible for the policy. Finally, we find that mortgage PH led to higher saving rates for more financially-stable households.

Keywords: Mortgage payment holidays; household behaviour; consumption; high-frequency data; difference-in-differences; panel data (search for similar items in EconPapers)
JEL-codes: D14 E21 G51 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2022-02-25
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-eur, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0963

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