Help to Spend? The Housing Market and Consumption Response to Relaxing the Down Payment Constraint

Belinda Tracey and Neeltje Van Horen

No 16144, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We show that relaxing the down payment constraint positively affects household consumption in addition to stimulating housing market activity. For identification, we use the UK Help-to-Buy (HTB) program as a quasi-natural experiment and exploit geographic variation in exposure to the program. We document a significant increase in home purchases, largely driven by first-time and young buyers. More exposed regions also experience a rise in home-related expenditures, non-durable consumption and loan-financed car purchases. Local demand effects appear to partly drive the consumption response. Our findings thus show that interventions in the mortgage market can have important local macroeconomic spillover effects.

Keywords: Borrowing constraints; Consumption; Housing market; Mortgage market (search for similar items in EconPapers)
JEL-codes: E21 G21 R21 R28 (search for similar items in EconPapers)
Date: 2022-02
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