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Mortgages and Financial Expectations: A Household Level Analysis

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Author Info
Sarah Brown ()
Gaia Garino ()
Karl Taylor ()

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Abstract

We contribute to the literature on household mortgage debt by exploring one particular influence on mortgage debt at the household level, namely the financial expectations of the individuals within the household. Our theoretical model predicts a positive association between the quantity of mortgage debt and optimistic financial expectations. Our empirical findings based on household level data provide convincing support for our theoretical priors in that optimistic financial expectations are positively associated with the level of outstanding mortgage debt.

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File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp05-9.pdf
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Publisher Info
Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 05/9.

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Date of creation: Apr 2005
Date of revision: Dec 2006
Handle: RePEc:lec:leecon:05/9

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Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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Related research
Keywords: Financial Expectations; Housing Tenure; Inter-temporal Consumption; Mortgage Debt;

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Find related papers by JEL classification:
D18 - Microeconomics - - Household Behavior - - - Consumer Protection
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-72, March. [Downloadable!] (restricted)
    Other versions:
  2. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November. [Downloadable!] (restricted)
    Other versions:
  3. Leece, David, 1995. "Rationing, Mortgage Demand and the Impact of Financial Deregulation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 43-66, February.
  4. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December. [Downloadable!] (restricted)
    Other versions:
  5. Jost, Peter-Jurgen, 1996. "On the Role of Commitment in a Principal-Agent Relationship with an Informed Principal," Journal of Economic Theory, Elsevier, vol. 68(2), pages 510-530, February. [Downloadable!] (restricted)
  6. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Blackwell Publishing, vol. 52(4), pages 647-63, October. [Downloadable!] (restricted)
  7. Leece, David, 2000. "Choice of Mortgage Instrument, Liquidity Constraints and the Demand for Housing Debt in the UK," Applied Economics, Taylor and Francis Journals, vol. 32(9), pages 1121-32, July. [Downloadable!] (restricted)
  8. Crook, Jonathan, 2001. "The Demand for Household Debt in the USA: Evidence from the 1995 Survey of Consumer Finance," Applied Financial Economics, Taylor and Francis Journals, vol. 11(1), pages 83-91, February. [Downloadable!] (restricted)
  9. Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May. [Downloadable!] (restricted)
  10. Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, vol. 92(1), pages 345-362, March. [Downloadable!]
  11. Stefan Krasa & Anne P. Villamil, 2000. "Optimal Contracts when Enforcement Is a Decision Variable," Econometrica, Econometric Society, vol. 68(1), pages 119-134, January.
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