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Mortgage arrears in Europe: The impact of monetary and macroprudential policies

Petra Gerlach-Kristen () and Sean Lyons ()

No 2015-05, Working Papers from Swiss National Bank

Abstract: Mortgage arrears arise if a household faces affordability problems and/or is in negative equity. Because widespread arrears pose a risk to the stability of banks and limit households' future access to credit, a crucial question is how monetary or macroprudential policies influence their incidence. We use a European household data set to analyse what drives arrears and find that affordability problems, such as unemployment, low income and high mortgage payments, matter, which suggests that monetary policy has an impact. Households facing the dual trigger of affordability problems and negative equity are more likely to go into longer-term arrears; macroprudential regulation preventing high loan-to-value (LTV) ratios can thus also have an impact.

Keywords: Arrears; negative equity; monetary policy; loan-to-value ratios (search for similar items in EconPapers)
JEL-codes: D14 E58 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eur, nep-mac, nep-mon and nep-ure
Date: 2015
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