Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302740 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11255
Publisher: 
CESifo GmbH, Munich
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 dataset 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.
Subjects: 
house prices
mortgage demand
housing consumption
consumption channel
property taxes
JEL: 
G11
G21
R21
Document Type: 
Working Paper
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