Seminar
Housing-consumption channel of mortgage demand
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Series
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Speaker(s)Nikodem Szumilo (University College London, United Kingdom)
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FieldSpatial Economics
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LocationTinbergen Institute Amsterdam, room 1.01
Amsterdam -
Date and time
November 14, 2024
12:00 - 13:00
Abstract
We quantify the housing-consumption channel in mortgage demand according to which households borrow more following house-price increases since housing and non-housing consumption are imperfect substitutes. To identify this channel, we take a structural approach to mortgage demand and supply, exploiting exogenous variation in house-price growth and a unique data set with matched transaction-price and mortgage information. We estimate an elasticity of mortgage borrowing to house-prices of 0.82. Counterfactual analysis of the general-equilibrium of housing and mortgage markets shows that, sans housing-consumption channel, mortgage and house-price growth in the UK would have been 50% and 31% lower, respectively, since the 1990s. Joint paper with Gabriel M Ahlfeldt and Jagdish Tripathy.