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Consumption Effects Of Mortgage Payment
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Book Synopsis Consumption Effects of Mortgage Payment Holidays: Evidence During the COVID-19 Pandemic by : Bruno Albuquerque
Download or read book Consumption Effects of Mortgage Payment Holidays: Evidence During the COVID-19 Pandemic written by Bruno Albuquerque and published by International Monetary Fund. This book was released on 2022-02-25 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use UK transaction-level data during the Covid-19 pandemic to study whether mortgage payment holidays (PH) can act as a mechanism for smoothing household consumption following negative aggregate shocks. Our results suggest that mortgage PH were accessed by both households with pre-existing financial vulnerabilities and by those with stronger balance sheets, including buy-to-let investors. We also find that the temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those non-eligible for the policy. Finally, we find that mortgage PH led to higher saving rates for more financially-stable households.
Book Synopsis Consumption Effects of Mortgage Payment by : Bruno Albuquerque
Download or read book Consumption Effects of Mortgage Payment written by Bruno Albuquerque and published by . This book was released on 2022 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis How Does Mortgage Debt Affect Household Consumption? Micro Evidence From China by : Ying Fan
Download or read book How Does Mortgage Debt Affect Household Consumption? Micro Evidence From China written by Ying Fan and published by . This book was released on 2017 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The high growth rate of mortgage debt in various emerging and developed economies has captured headlines following the financial crisis. In this paper, we investigate how mortgage debt impacts household consumption behavior and various components of household consumption. Utilizing a comprehensive household survey data from China, we show that households with a mortgage consume a higher portion of their income than households without a mortgage. This is in line with the argument that having a mortgage reduces the uncertainty that the household faces regarding how much to save each month in order to be able to own a house, and this reduced uncertainty leads to lower monthly savings for the purpose of buying a house. We also find that among households with a mortgage, those who spend a larger share of their income on mortgage payments spend less of their income on consumption, reflecting the crowding out effect of mortgage payments on household consumption. Furthermore, we show that a government policy of decreasing the maximum loan-to-value ratio has a significant impact on the consumption behavior of households. The current paper offers the first evidence of the impact of growing mortgage debt on the consumption behavior of households. Our results will have implications for government policies that encourage mortgage borrowing.
Book Synopsis Do Homeowners Increase Consumption After the Last Mortgage Payment by : Brahima Coulibaly
Download or read book Do Homeowners Increase Consumption After the Last Mortgage Payment written by Brahima Coulibaly and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The maturity date of a mortgage loan marks the end of monthly mortgage payments for homeowners. In the period after the last payment, homeowners experience an increase in their disposable income. Our study interprets this event as an anticipated increase in income, and tests whether households smooth consumption over the transition period as predicted by the rational expectation Life-Cycle/Permanent-Income Hypothesis. We find households do not alter nondurable goods consumption in the period following the last mortgage payment. Instead, they increase both financial savings and savings in durable goods such as housefurnishings and entertainment equipments in the year of the last mortgage payment.
Book Synopsis Mortgage Rates, Household Balance Sheets, and the Real Economy by : Benjamin J. Keys
Download or read book Mortgage Rates, Household Balance Sheets, and the Real Economy written by Benjamin J. Keys and published by . This book was released on 2014 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the impact of lower mortgage rates on household balance sheets and other economic outcomes during the housing crisis. We use proprietary loan-level panel data matched to consumer credit records using borrowers' Social Security numbers, which allows for accurate measurement of the effects. Our main focus is on borrowers with agency loans, which constitute the vast majority of U.S. mortgage borrowers. Relying on variation in the timing of resets of adjustable rate mortgages, we find that a sizable decline in mortgage payments ($150 per month on average) induces a significant drop in mortgage defaults, an increase in new financing of durable consumption (auto purchases) of more than 10% in relative terms, and an overall improvement in household credit standing. New financing of durable consumption by borrowers with lower housing wealth responds more to mortgage payment reduction relative to wealthier households. Credit-constrained households initially use more than 70% of the extra liquidity generated by mortgage rate reductions to repay credit card debt- a deleveraging response that can significantly restrict the ability of monetary policy to stimulate these households' consumption. These findings also qualitatively hold in a sample of less-prevalent borrowers with private non-agency loans. We then use regional variation in mortgage contract types to explore the impact of lower mortgage rates on broader economic outcomes. Regions more exposed to mortgage rate declines saw a relatively faster recovery in house prices, increased durable (auto) consumption, and increased employment growth, with responses concentrated in the non-tradable sector. Our findings have implications for the pass-through of monetary policy to the real economy through mortgage contracts and household balance sheets.
Book Synopsis Consumption Smoothing After the Final Mortgage Payment by : Barry Scholnick
Download or read book Consumption Smoothing After the Final Mortgage Payment written by Barry Scholnick and published by . This book was released on 2013 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether the magnitude of an anticipated income change impacts consumption smoothing (i.e. the magnitude hypothesis). Even though this hypothesis has been discussed for almost 50 years, we are one of the first to provide formal statistical evidence to support it. We consider the natural experiment of an individual's final mortgage payment, and examine how it impacts credit card consumption. The final mortgage payment is an anticipated change in disposable income, thus theory predicts that consumption should not respond on that date. Our treatment group consists of individuals who make a final mortgage payment and our control group consists of individuals who continue to make monthly mortgage payments. We can identify causality as running from the final mortgage payment to credit card consumption because the dates of final mortgage payments are distributed across individuals over time. We find that the magnitude of final mortgage payments does impact the response of credit card consumption.
Book Synopsis Credit card use after the final mortgage payment : does the magnitude of income shocks matter? by : Barry Scholnick
Download or read book Credit card use after the final mortgage payment : does the magnitude of income shocks matter? written by Barry Scholnick and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Consumer Spending Response to Mortgage Resets by : Kanav Bhagat
Download or read book The Consumer Spending Response to Mortgage Resets written by Kanav Bhagat and published by . This book was released on 2017 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this report, we examine how a sample of US homeowners changed their credit card spending in response to a predictable drop in their mortgage payment driven by the Federal Reserve's low interest rate policy that followed the Great Recession. Using a de-identified sample of Chase customers who had a hybrid adjustable-rate mortgages (ARM) and a Chase credit card, we analyze changes in credit card spending and revolving balance leading up to and after mortgage reset. We organize our results into four findings. First, forty-four percent of the homeowners in our sample experienced a large drop in their hybrid ARM payment at reset, which on average represented over 5 percent of their monthly income. Second, homeowners increased their spending by 9 percent in advance of the anticipated drop in their mortgage payments and by 15 percent after reset, despite a considerable drop in housing wealth. Third, homeowners used credit card borrowing to finance 21 percent of their pre-reset anticipatory spending increase, and post-reset they further increased their revolving balances. Over the full two year period, their total spending increase exceeded their mortgage-related savings by 4 percent. Fourth, Homeowners used the savings from lower hybrid ARM payments to make more purchases across all spending categories, notably home improvements and healthcare. Overall, we find that in a declining interest rate environment, the income channel that transmits interest rate policy to homeowners with ARMs is automatic, the consumer response is considerable, and that there are both anticipatory and contemporaneous increases in consumption. Additional research is needed to understand if the income channel also has the intended and expected contractionary effects on consumer spending as policy rates move higher. Armed with a full understanding, housing policy makers could evaluate the policies that influence which type of mortgage (fixed-rate or variable-rate) borrowers choose and should consider the effects these policies will have on the ability of monetary policy to impact personal consumption through the business cycle.
Book Synopsis Mortgage Defaults by : Juan Carlos Hatchondo
Download or read book Mortgage Defaults written by Juan Carlos Hatchondo and published by International Monetary Fund. This book was released on 2012-01-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper incorporates house price risk and mortgages into a standard incomplete market (SIM) model. The model is calibrated to match U.S. data and accounts for non-targeted features of the data such as the distribution of down payments, the life-cycle profile of home ownership, and the mortgage default rate. The average coefficients that measure the agents' ability to self-insure against income shocks are similar to those of a SIM model without housing but housing increases the values of these coefficients for younger agents. The response of consumption to house price shocks is minimal. The introduction of minimum down payments or income garnishment benefits a majority of the population.
Book Synopsis Household Debt, Consumption, and Monetary Policy in Australia by : Ms.Elena Loukoianova
Download or read book Household Debt, Consumption, and Monetary Policy in Australia written by Ms.Elena Loukoianova and published by International Monetary Fund. This book was released on 2019-04-05 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the evolution of the household debt in Australia and finds that while higher-income and higher-wealth households tend to have higher debt, lower-income households may become more vulnerable to rising debt service over time. Then, the paper analyzes the impact of a monetary policy shock on households’ current consumption and durable expenditures depending on the level of household debt. The results corroborate other work that households’ response to monetary policy shocks depends on their debt and income levels. In particular, households with higher debt tend to reduce their current consumption and durable expenditures more than other households in response to a contractionary monetary policy shocks. However, households with low debt may not respond to monetary policy shocks, as they hold more interest-earning assets.
Book Synopsis National Saving and Economic Performance by : John B. Shoven
Download or read book National Saving and Economic Performance written by John B. Shoven and published by University of Chicago Press. This book was released on 2009-02-15 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt: The past decade has witnessed a decline in saving throughout the developed world—the United States has the dubious distinction of leading the way. The consequences can be serious. For individuals, their own economic security and that of their families is jeopardized. For society, inadequate rates of saving have been blamed for a variety of ills—decreasing the competitive abilities of American industry, slowing capital accumulation, increasing our trade deficit, and forcing the sale of capital stock to foreign investors at bargain prices. Restoring acceptable rates of saving in the United States poses a major challenge to those who formulate national economic policy, especially since economists and policymakers alike still understand little about what motivates people to save. In National Saving and Economic Performance, edited by B. Douglas Bernheim and John B. Shoven, that task is addressed by offering the results of new research, with recommendations for policies aimed to improve saving. Leading experts in diverse fields of economics debate the need for more accurate measurement of official saving data; examine how corporate decisions to retain or distribute earnings affect household-level consumption and saving; and investigate the effects of taxation on saving behavior, correlations between national saving and international investment over time, and the influence of economic growth on saving. Presenting the most comprehensive and up-to-date research on saving, this volume will benefit both academic and government economists.
Book Synopsis Mortgage Decisions of Households by : Rikke Sejer Nielsen
Download or read book Mortgage Decisions of Households written by Rikke Sejer Nielsen and published by . This book was released on 2022 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Do High Debt Payments Hinder Household Consumption Smoothing? by : Kathleen W. Johnson
Download or read book Do High Debt Payments Hinder Household Consumption Smoothing? written by Kathleen W. Johnson and published by . This book was released on 2007 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Financial Concerns and the Marginal Propensity to Consume in COVID Times: Evidence from UK Survey Data by : Bruno Albuquerque
Download or read book Financial Concerns and the Marginal Propensity to Consume in COVID Times: Evidence from UK Survey Data written by Bruno Albuquerque and published by International Monetary Fund. This book was released on 2022-03-04 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study how household concerns about their future financial situation may affect the marginal propensity to consume (MPC) during the COVID-19 pandemic. We use a representative survey of UK households to compute the MPC from a hypothetical transfer of £500. We find that household expectations play a key role in determining differences in MPCs across households: households concerned about not being able to make ends meet have a 20% higher MPC than other households. Our findings suggest that policies targeted to vulnerable and financially distressed households may prove more effective in stimulating demand than providing stimulus payments to all households.
Book Synopsis Household Leverage and the Recession by : Callum Jones
Download or read book Household Leverage and the Recession written by Callum Jones and published by International Monetary Fund. This book was released on 2018-08-30 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We evaluate and partially challenge the ‘household leverage’ view of the Great Recession. In the data, employment and consumption declined more in states where household debt declined more. We study a model where liquidity constraints amplify the response of consumption and employment to changes in debt. We estimate the model with Bayesian methods combining state and aggregate data. Changes in household credit limits explain 40 percent of the differential rise and fall of employment across states, but a small fraction of the aggregate employment decline in 2008-2010. Nevertheless, since household deleveraging was gradual, credit shocks greatly slowed the recovery.
Book Synopsis The Economics of Consumption by : Tullio Jappelli
Download or read book The Economics of Consumption written by Tullio Jappelli and published by Oxford University Press. This book was released on 2017-09-01 with total page 313 pages. Available in PDF, EPUB and Kindle. Book excerpt: Consumption decisions are crucial determinants of business cycles and growth. Knowledge of how consumers respond to the economic environment and how they react to the risks that they encounter during the life-cycle is therefore important for evaluating stabilization policies and the effectiveness of fiscal packages implemented in response to economic downturns or financial crises. In The Economics of Consumption, Tullio Jappelli and Luigi Pistaferri provide a comprehensive examination of the most important developments in the field of consumption decisions and evaluate economic models against empirical evidence. The first part of the book provides the basic ingredients of economic models of consumption decisions. The central part reviews the empirical literature on the effect of income and wealth changes on consumption and on the relevance of precautionary saving and credit market imperfections. The last chapters extend the basic framework to such important areas as bequests, leisure, lifetime uncertainty, and financial sophistication. Jappelli and Pistaferri shed light on important issues, including how consumption responds to changes in economic resources, how economic circumstances and consumers' characteristics influence behavior, and whether consumption inequality depends on income shocks and their persistence.
Book Synopsis Consumption Behavior and the Effects of Government Fiscal Policies by : Randall P. Mariger
Download or read book Consumption Behavior and the Effects of Government Fiscal Policies written by Randall P. Mariger and published by Harvard University Press. This book was released on 1986 with total page 292 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Consumption Behavior and the Effects of Government Fiscal Policies, Randall Mariger explores how people make decisions about how much to consume and save over their lifetimes. An understanding of these issues illuminates not only individual behavior but important properties of the macro economy as well. The most popular framework for analyzing consumption has been the life-cycle theory. Mariger tests two fundamental, and controversial, assumptions underlying the theory--that there are no planned bequests and that human capital is marketable. To do this, he fits a structural consumption model that incorporates endogenous liquidity constraints (non-marketability of human capital), but no planned bequests, to data on a cross-section of U. S. families. This estimated model, in conjunction with estimates of alternative models, enables him to make inferences about the respective effects of liquidity constraints and social security wealth on consumption. This latter effect yields indirect evidence concerning planned bequests. Mariger also presents direct evidence concerning bequest behavior. Among his findings are that the model fits the data very well in spite of its tight theoretical structure; that liquidity constraints are prevalent and have important effects on consumption behavior; that planned bequests appear not to be common among families in the lower 99.1% of the wealth distribution; and that families in the upper 0.9% of the wealth distribution appear to plan substantial bequests. Mariger devotes the latter part of his book to studying the implications of his estimated consumption model for the effects of government fiscal policies. More specifically, he simulates the model to infer the effects of government tax/debt policy, as well as those of the social security system, on aggregate savings.
