Varieties of indebtedness: Financialization and mortgage market institutions in Europe

Abstract

During the global housing boom that preceded the 2007-9 financial crisis, household debt increased substantially in many European countries, posing a challenge for literature on financialization and the institutional heterogeneity of mortgage markets. This paper examines recent institutional shifts in European mortgage markets and specifies three analytically distinct models of debt accumulation: inclusion, extension and intensity. While existing research has emphasized inclusion (access to homeownership), we show that financial intensification is an important determinant of cross-national variation in debt. We assess the variation in financial intensity in six European countries (France, Germany, Italy, the Netherlands, Portugal and Spain) using household-level survey data. Our results show that inclusion and expansion explain only part of the cross-national variation in mortgage debt to income ratios. Furthermore, household financial behavior is consistent with the financial intensity model, and variation in the degree of financial intensification explains a substantial portion of the cross-national difference in debt levels.

The Wealth Inequality of Nations

“…Doing so would also promise to ameliorate the surprising disconnect between the scholarships on wealth and debt (see also Dwyer 2018). The comparative study of lending regimes is at an early stage but has produced some interesting initial insights: For instance, in a comparison of the mortgage debt structure in six European countries, van Gunten and Navot (2018) show that differences in the distribution of mortgage debt is best captured by the degree of credit intensity, i.e., the expansion of credit among those already holding it, rather than differences in mortgage market participation (which also makes the distribution of mortgage credit largely independent from national home ownership rates). This pattern chimes well with our finding of the dominant role of the distribution of housing equity, rather than home ownership rates, in explaining overall wealth inequality.…”

More Mortgages, More Homes? The Effect of Housing Financialization on Homeownership in Historical Perspective

“…No distinction can thus be made between an extension of mortgages due to more mortgagors or to more mortgage volume per mortgagor, available to individual level cross-sections. 42 Using first differences is only a partial remedy to this problem, but aggregate data on new-instead of outstanding-mortgages or new homeowners are not available for a similar sample. Second, all data are aggregate numbers and do not contain any information about the underlying individual decision to buy or to rent.…”

Intergenerational wealth transmission and homeownership in Europe–a comparative perspective

“…The present young adult cohort is facing declining rates of homeownership [37] while living in a time of greater uncertainty and instability than their parents [38]. They live in an era of intensified mortgage market financialization, with more households taking up higher mortgage loans [39,40], increased housing price inflation, growing labor market uncertainty, relatively high unemployment rates [41], income stagnation in many Western countries [42], and shrinking welfare benefits. Hence, a corpus of studies has documented difficulties and delays in transitioning to first-time homeownership across countries as compared to earlier cohorts [38,43].…”