A Structural Model of Mortgage Offset Accounts in the Australian Housing Market

James Graham

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: I study a novel institutional feature of Australian housing markets: the widespread use of mortgage offset accounts. These accounts reduce mortgage interest costs and increase the liquidity of mortgage balances. I build a heterogeneous agent life-cycle model of the Australian housing market to study who benefits from these accounts and by how much. Households in middle age, with high incomes, and with more expensive houses are most likely to use offset accounts and derive larger benefits from their use. I show that a social planner could maintain mortgage profitability, improve household welfare, and more evenly distribute benefits by adjusting the price structure of offset accounts.

Keywords: housing; mortgage; offset account; hetereogeneous agents; life-cycle model (search for similar items in EconPapers)
JEL-codes: E21 E44 G21 G51 R21 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2024-05
New Economics Papers: this item is included in nep-ban, nep-dge and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: A Structural Model of Mortgage Offset Accounts in the Australian Housing Market (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2024-35

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