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

James Graham

No 2024-09, Working Papers from University of Sydney, School of Economics

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)
Date: 2024-09
New Economics Papers: this item is included in nep-dge and nep-ure
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Citations: View citations in EconPapers (1)

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Working Paper: A Structural Model of Mortgage Offset Accounts in the Australian Housing Market (2024)
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