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House Price Shocks and Household Indebtedness in the United Kingdom

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  • RICHARD DISNEY
  • SARAH BRIDGES
  • JOHN GATHERGOOD

Abstract

We use household panel data to explore the link between changes in house prices and household indebtedness (both secured on housing assets and unsecured) in the United Kingdom. We show that households which are borrowing-constrained by a lack of housing equity as collateral make greater use of unsecured debt such as credit cards or personal loans. In response to rising house prices, which relax this constraint, such households are more likely to refinance and to increase their indebtedness relative to unconstrained households. However, for most households, house price movements appear to have little impact on indebtedness. Copyright (c) The London School of Economics and Political Science 2009.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0335.2008.00773.x
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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 77 (2010)
Issue (Month): 307 (07)
Pages: 472-496

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Handle: RePEc:bla:econom:v:77:y:2010:i:307:p:472-496

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Cited by:
  1. Weber, Jeremy G. & Key, Nigel, 2013. "Does proprietor wealth influence small business decisions? Land appreciation and farm business borrowing, land ownership, and output," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150408, Agricultural and Applied Economics Association.
  2. John Gathergood, . "Racial Disparities in Credit Constraints in the Great Recession: Evidence from the UK," Discussion Papers 11/09, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  3. Callan Windsor & Jarkko Jääskelä & Richard Finlay, 2013. "Home Prices and Household Spending," RBA Research Discussion Papers rdp2013-04, Reserve Bank of Australia.
  4. Atalay, Kadir & Whelan, Stephen & Yates, Judith, 2013. "Housing Wealth and Household Consumption: New Evidence from Australia and Canada," Working Papers 2013-04, University of Sydney, School of Economics.
  5. Viola Angelini & Peter Simmons, . "Housing Debt and Consumption," Discussion Papers 11/20, Department of Economics, University of York.
  6. Dawson, Chris & Henley, Andrew, 2012. "Something will turn up? Financial over-optimism and mortgage arrears," Economics Letters, Elsevier, vol. 117(1), pages 49-52.

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