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Housing assistance policy for mortgage borrowers: liquidity improvements or price acceleration?

Author

Listed:
  • McCann, Fergal

    (Central Bank of Ireland)

  • Singh, Anuj Pratap

    (Central Bank of Ireland)

Abstract

Public subsidies to support the downpayments of mortgaged home purchasers can be absorbed in the housing market in a number of ways. Using granular data on loans and borrowers in Ireland, we assess three possible transmission channels of an enhancement to subsidy payments introduced in mid-2020: borrowers’ liquidity, equity (or indebtedness), and home purchase values. Our estimates suggests that outof-pocket downpayments fall by almost the size of the increase in the subsidy value, suggesting improvement in liquidity position of eligible borrowers. We also find that this liquidity improving effect is present across all income levels, but highest in the middle of the borrower income distribution. Equity enhancements (lowering Loan-tovalue ratios) and house price increases are smaller in magnitude and more prevalent among higher income borrowers.

Suggested Citation

  • McCann, Fergal & Singh, Anuj Pratap, 2023. "Housing assistance policy for mortgage borrowers: liquidity improvements or price acceleration?," Research Technical Papers 4/RT/23, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:4/rt/23
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    File URL: https://www.centralbank.ie/docs/default-source/publications/research-technical-papers/housing-assistance-policy-for-mortgage-liquidity-improvements-or-price.pdf?sfvrsn=a5d59e1d_7
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    More about this item

    Keywords

    Downpayment constraint; housing assistance schemes; macroprudential policy; borrower liquidity.;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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