Second Mortgages and Household Saving
AbstractSecond mortgages accounted for 10.8% of the stock of outstanding mortgage debt at the end of 1987, up from 3.6% at the beginning of the 198Os. This paper investigates the determinants of second mortgage borrowing and the characteristics of second mortgage borrowers. We first calculate the outstanding stock of home equity that remains to be borrowed against on tax-preferred terms, recognizing the limits on interest deductions in the 1986 Tax Reform Act and the 1987 Omnibus Budget Reconciliation Act. Despite these limits, we estimate that more than two trillion dollars of housing equity remains to be borrowed against by current homeowners. We then present cross-sectional evidence suggesting that households who obtain second mortgages after purchasing a home ace less wealthy than other households with similar characteristics. Each dollar of second mortgage borrowing is associated with a seventy-five cent reduction in household net worth. While these results cannot be given a causal interpretation, they are consistent with the view that increased access to second mortgages has reduced personal saving.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2853.
Date of creation: Dec 1989
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
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.:
- Quigley, John M, 1987. "Interest Rate Variations, Mortgage Prepayments and Household Mobility," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 636-43, November.
- N. Gregory Mankiw & David N. Weil, 1990.
"The Baby Boom, The Baby Bust, and the Housing Market,"
NBER Working Papers
2794, National Bureau of Economic Research, Inc.
- Mankiw, N. Gregory & Weil, David N., 1989. "The baby boom, the baby bust, and the housing market," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 235-258, May.
- Glenn B. Canner & James T. Fergus & Charles A. Luckett, 1988. "Home equity lines of credit," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 361-373.
- Lawrence Summers & Chris Carroll, 1987. "Why Is U.S. National Saving So Low?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(2), pages 607-642.
- Louis-David L. Dicks-Mireaux & Mervyn A. King, 1983. "Portfolio Composition and Pension Wealth: An Econometric Study," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 399-440 National Bureau of Economic Research, Inc.
- Mervyn A. King & Louis Dicks-Mireaux, 1982. "Asset Holdings and the Life Cycle," NBER Working Papers 0614, National Bureau of Economic Research, Inc.
- King, M A & Dicks-Mireaux, L-D L, 1982. "Asset Holdings and the Life-Cycle," Economic Journal, Royal Economic Society, vol. 92(366), pages 247-67, June.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.