Income Volatility and Residential Mortgage Delinquency: Evidence from 12 EU Countries

Luis Diaz-Serrano ()

No 1396, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate the socio-economic determinants of mortgage delinquency in 12 EU countries and observe that income volatility significantly increases the mortgage delinquency risk. This pattern even holds for borrowers with higher-income profiles if volatility in income is high enough. From this result we can draw the following conclusions: i) mortgage protection insurance policies might be failing to cover those borrowers most in need; ii) the existence of credit market imperfections, and; iii) the inability for a number of borrowers most at income risk to accumulate precautionary savings in order to meet mortgage payments when shocks in income arise.

Keywords: homeownership; credit market imperfections; mortgage insurance; income volatility; precautionary savings; payment-to-income ratio; mortgage delinquency (search for similar items in EconPapers)
JEL-codes: D1 J0 R0 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2004-11
New Economics Papers: this item is included in nep-eec and nep-geo
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Citations: View citations in EconPapers (4)

Published - published as 'Income volatility and residential mortgage delinquency across the EU' in: Journal of Housing Economics, 2005, 14 (3), 153-177

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Working Paper: Income Volatility and Residential Mortgage Delinquency: Evidence from 12 EU countries (2005)
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