Choice of mortgage instrument, liquidity constraints and the demand for housing debt in the UK

Leece, David

doi:10.1080/000368400404263

Cited by 32 publications

(19 citation statements)

References 31 publications

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“…Given the inclusion of the regional perspective, the empirical specification follows the analyses of BRUECKNER (1994) and LEECE (2000bLEECE ( , 2006. It is expected that regional variations in incomes and mortgage affordability rates may be reflected by the geographical patterns of mortgage contract decisions.…”

Section: Model Specificationmentioning

confidence: 99%

Regional Differences in Mortgage Demand and Mortgage Instrument Choice in the UK

2013

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KOBLYAKOVA A., HUTCHISON N. and TIWARI P. Regional differences in mortgage demand and mortgage instrument choice in the UK, Regional Studies. This paper presents empirical evidence of regional variations in mortgage choice decisions within the UK's mortgage sector. Utilizing British Household Panel Survey (BHPS) data for the years 2001, 2007 and 2008, the paper suggests that a household's decision to choose a variable rate mortgage is more likely to occur in areas with lower incomes and affordability rates, such as Northern England, Scotland and Wales. Since variable rate mortgages are more sensitive to income and monetary policy shocks, the disproportional distribution of variable contracts within the mortgage sector may have a differential impact on the regions. Mortgage choiceFixed and variable rate mortgages Regional differences KOBLYAKOVA A., HUTCHISON N. and TIWARI P. 英国抵押贷款需求与贷款方式选择的区域差异，区域研究。本文呈现英国抵押贷款部门进行抵押贷款选择决策中的区域差异之经验数据。本文运用英国于 2001 、 2007 及 2008 年的家户调查资料 (BHPS), 主张在北英格兰、苏格兰与韦尔斯等收入和可负担比率较低的地区中，家户更有可能倾向选择浮动利率抵押贷款。由于浮动利率抵押贷款较易受收入与金融政策冲击所影响，因此抵押贷款部门中浮动利率契约的分布不均状态，有可能会对区域产生不同的影响。抵押贷款选择固定利率贷款与浮动利率贷款区域差异 KOBLYAKOVA A., HUTCHISON N. et TIWARI P. Les différences régionales de la demande et des instruments hypothécaires au Royaume-Uni, Regional Studies. Cet article présente des preuves empiriques de la variation régionale des choix d'instruments hypothécaires au sein du secteur. À partir des données provenant de la British Household Panel Survey (BHPS -une enquête par panel auprès des ménages britanniques) pour 2001, 2007 et 2008, cet article laisse supposer que la décision d'un ménage de souscrire à un prêt hypothécaire à taux variable est plus probable dans les régions à revenus faibles où les taux sont moins élevés, telles le nord de l'Angleterre, l'Écosse et le pays de Galles. Vu que les prêts hypothécaires à taux variable sont plus sensibles aux chocs de politique touchant les revenus et le système monétaire, il se peut que la distribution disproportionnée des contrats à taux variable au sein du secteur ait des effets différents sur les régions. Choix de prêt hypothécaire Taux fixes et variables Différences régionales KOBLYAKOVA A., HUTCHISON N. und TIWARI P. Regionale Unterschiede bei der Nachfrage nach Hypotheken und Auswahl von Hypothekenverträgen in Großbritannien, Regional Studies. In diesem Beitrag werden empirische Belege für regionale Schwankungen bei den Entscheidungen zur Auswahl einer Hypothek im Hypothekensektor Großbritanniens vorgestellt. Anhand von Daten der British Household Panel Survey (BHPS) für die Jahre 2001, 2007 und 2008 wird verdeutlicht, dass die Entscheidung eines Haushalts zum Abschluss einer Hypothek mit variablem Zinssatz in Gebieten mit niedrigerem Einkommens-und Erschwinglichkeitsniveau (wie z. B. Nordengland, Schottland und Wales) häufiger gefällt wird. Da Hypotheken mit variablem Zinssatz gegenüber Einkommens-und monetären Schocks empfindlicher sind, kann die disproportionale Verteilung von Verträgen mit variablem Zinssatz innerhalb des Hypothekensektors eine diffe...

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Section: Model Specificationmentioning

confidence: 99%

Regional Differences in Mortgage Demand and Mortgage Instrument Choice in the UK

2013

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“…as in the standard logit model, 19 with the only difference being the individual specific effect, α i .…”

Section: Estimation Methodsmentioning

confidence: 99%

Labour market participation and mortgage related borrowing constraints

Bottazzi

2004

Working Paper Series

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This paper analyses the relationship between female labour market participation and mortgage commitments in a life-cycle set up. In particular, it examines whether a mortgage qualification constraint has any effect on female labour market participation. This is done by conditioning on the mortgage decision in a labour market participation equation for married women. Endogeneity of the mortgage variable is tested using house price data. Panel data from the British Household Panel Study is used in order to control for unobserved heterogeneity in participation. Summary• This paper analyses the relationship between female labour participation and mortgage commitments in a life-cycle set up for UK households.• It is important to study the relationship between labour supply and mortgagerelated liquidity constraints because housing represents the biggest component of household assets in the UK and because of the existence of an explicit constraint related to labour income when the mortgage is taken out.• The data used are from the British Household Panel Survey for the years 1993-2000, and the working sample is made of women aged 25-40, in couples, whose husband works full-time. Self-employed individuals and renters are excluded from the analysis.• Estimation is performed by means of a fixed effect logit model, which means that individual unobserved heterogeneity can be controlled for without imposing any structure on the correlation between this and the explanatory variables. In this specific context, it is important to allow individual preference towards work to be correlated with mortgage decisions.• It is found that mortgage commitments, as captured by the ratio between monthly mortgage payment and household income excluding female's earned income, have a positive effect on female participation, at least up to age 34. However, the negative effect on female participation of having a young child is very strong and the combined effect of children and mortgage commitments on participation can stay negative.

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“…From the demand side, the selection of a specific mortgage contract principally depends on income, house price dynamics and the flexibility of tmortgage contract terms (Campbell and Cocco, 2003;Piskorsky and Thistyi, 2011). Additionally, it may depend on personal and demographic characteristics (Sa-Aadu, and Sirmans, 1995;Ling and McGill, 1998), risk preferences (Brueckner, 1994;1995;Campbell and Cocco, 2003), the opportunity cost of owner occupation (Leece, 2004), interest rate expectations (Leece, 2000a;, liquidity constraints and affordability issues (Leece, 2000b;LaCour-Little, 2009;Bramley and Watkins, 2009). From the supply side, mortgage contract choice is influenced by the institutional features and efficiency of the mortgage finance system (Lanot and Leece, 2014;Leece, 2004;Stephens, 2007;Scanlon and Whitehead, 2011), mortgage pricing and mortgage funding mechanisms (Stephens and Quilgairs, 2008;Ambrose and LaCour-Little, 2001;Loutskina, 2011;Badarinza, et.al., 2013, Campbell, 2013, profitability factors (Vickery, 2006;Petersen, et.al., 2012;Fuster and Vickery, 2013), and macroeconomic issues (Miles, 2004;Whitehead2011).…”

Section: Introductionmentioning

confidence: 99%

Supply driven mortgage choice

Koblyakova

White

2016

Urban Studies

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.Variable mortgage contracts dominate the UK mortgage market (Miles, 2004). The dominance of the variable rate mortgage contracts has important consequences for the transmission mechanism of monetary policy decisions and systemic risks (Khandani et al., 2012;Fuster and Vickery, 2013). This raises an obvious concern that a mortgage market such as that in the UK, where the major proportion of mortgage debt is either at a variable or fixed for less than two years rate (Badarinza, et al., 2013; CML, 2012), is vulnerable to alterations in the interest rate regime. Theoretically, mortgage choice is determined by demand and supply factors. So far, most of the existing literature has focused on the demand side perspective, and what is limited is consideration of supply side factors in empirical investigation on mortgage choice decisions. This paper uniquely explores whether supply side factors may partially explain observed/ex-post mortgage type decisions. Empirical results detect that lenders' profit motives and mortgage funding/pricing issues may have assisted in preferences toward variable rate contracts. Securitisation is found to positively impact upon gross mortgage lending volumes while negatively impacting upon the share of variable lending flows. This shows that an increase in securitisation not only improves liquidity in the supply of mortgage funds, but also has the potential to shift mortgage choices toward fixed mortgage debt. The policy implications may involve a number of measures, including reconsideration of the capital requirements for the fixed, as opposed to the variable rate mortgage debt, growing securitisation and optimisation of the mortgage pricing policies.

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Choice of mortgage instrument, liquidity constraints and the demand for housing debt in the UK

Cited by 32 publications

References 31 publications

Regional Differences in Mortgage Demand and Mortgage Instrument Choice in the UK

Regional Differences in Mortgage Demand and Mortgage Instrument Choice in the UK

Labour market participation and mortgage related borrowing constraints

Supply driven mortgage choice

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