IDEAS home Printed from https://ideas.repec.org/a/akh/journl/597.html
   My bibliography  Save this article

Comparing Downpayment and Interest Rate Mortgage Subsidies: An Analytical Approach

Author

Listed:
  • Ricardo Bebczuk y Edgardo Demaestri

    (Universidad Nacional de La Plata)

  • Ricardo Bebczuk y Edgardo Demaestri

    (Inter-American Development Bank (IADB))

Abstract

Our paper sets up a simple model to assess, for the first time, the relative pros and cons of housing downpayment (DS) and interest rate (IRS) subsidies on the access to and the stability of the mortgage market. Our analysis unveils a number of relevant policy lessons for the design of housing subsidy programs, among them: (a) For fiscal neutrality (same government outlay) to hold, the percentage IRS must be larger than the DS; (b) The IRS raises the loan size a bank is willing to grant, but the DS; (c) When targeting lower income households, the DS is superior to the interest rate subsidy; (d) The DS may increase the probability of default due to this focalization, while the IRS may have the same effect via the increased borrower leverage; and (e) Compared to the IRS, the DS promotes a less aggressive competition in the real estate market.

Suggested Citation

  • Ricardo Bebczuk y Edgardo Demaestri & Ricardo Bebczuk y Edgardo Demaestri, 2015. "Comparing Downpayment and Interest Rate Mortgage Subsidies: An Analytical Approach," Económica, Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 61, pages 35-51, January-D.
    • Handle: RePEc:akh:journl:597
    as

    Download full text from publisher

    File URL: https://revistas.unlp.edu.ar/Economica/article/view/5343/4372
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Mortgage subsidies; subsidy focalization; government subsidies; bank mortgage market.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:akh:journl:597. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Laura Carella (email available below). General contact details of provider: https://edirc.repec.org/data/funlpar.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.