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Determinants of Mortgage Debt Growth in EU Countries

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Author Info

  • Guido Wolswijk

Abstract

This paper presents an analysis of mortgage debt growth in the EU-15 countries. Mortgage debt has risen quickly in many countries in recent years, reaching historically very high levels that increasingly attract the attention from both researchers and policymakers. While there are some papers on factors behind national mortgage debt developments, studies taking a broader approach, both regarding the number of countries included and the potential determinants of mortgage debt growth, are still lacking. This study aims at filling this gap and presents estimates for real mortgage debt growth for the EU-15 countries, using pooled regressions for the period 1982-2003. Special attention is paid to properly defining mortgage costs, for which an after-tax measure is constructed. The regressions indicate that real mortgage debt is affected by after-tax mortgage interest costs, by house prices, financial deregulation, and stock markets, while the effects of household disposable income and inflation are less evident. These results are shown to be relatively robust using alternative time periods, estimation techniques, and groups of countries, only Greece being somewhat of an exception. Finally, we pay attention to tax instruments for influencing housing market developments, notably the deductibility of mortgage interest payments from personal income tax. The paper concludes that tax instruments have the potential to contribute to more stable mortgage debt developments.

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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/14616710600787627&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Journal of Housing Policy.

Volume (Year): 6 (2006)
Issue (Month): 2 ()
Pages: 131-149

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Handle: RePEc:taf:intjhp:v:6:y:2006:i:2:p:131-149

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Web page: http://www.tandfonline.com/REUJ20

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Related research

Keywords: Mortgage; European Union; tax policy;

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References

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  1. Martins, Nuno C. & Villanueva, Ernesto, 2006. "The impact of mortgage interest-rate subsidies on household borrowing," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1601-1623, September.
  2. Irene de Greef & Ralph de Haas, 2002. "Housing Prices, Bank Lending, and Monetary Policy," Macroeconomics 0209010, EconWPA.
  3. Karl E. Case & Robert J. Shiller, 1988. "The behavior of home buyers in boom and post-boom markets," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 29-46.
  4. Trevor Fitzpatrick & Kieran Mcquinn, 2007. "House Prices And Mortgage Credit: Empirical Evidence For Ireland," Manchester School, University of Manchester, vol. 75(1), pages 82-103, 01.
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Cited by:
  1. Badev, Anton & Beck, Thorsten & Vado, Ligia & Walley, Simon, 2014. "Housing finance across countries : new data and analysis," Policy Research Working Paper Series 6756, The World Bank.

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