Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322389 
Year of Publication: 
2025
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 452
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
Using a monthly panel dataset of individuals' debt, we show that house price changes can explain a significant fraction of personal debt composition dynamics. We exploit the variation in local house price growth as shocks to homeowners' housing wealth to study the consequential adjustment of debt portfolio. We present direct evidence that homeowners re-optimize their debt structure by using parts of withdrawn home equity to pay down comparatively expensive non-mortgage debt during a housing boom. The effect is strongest for homeowners that have a high debt-to-income ratio and live in a municipality with a high literacy level. We find evidence that macroprudential policy and interest rates are important for consumer debt decisions.
Subjects: 
Personal Debt Management
Home Equity Extraction
Household Debt
Housing
Financial Literacy
Macroprudential Policy
JEL: 
D14
G21
G51
G53
R31
Document Type: 
Working Paper

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