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Testing a theoretical model of mortgage demand on UK data

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  • David Leece

Abstract

Mortgage demand is a poorly understood and under-researched aspect of the financial behaviour of households. This paper tests empirically the basic results of Brueckner's model of mortgage demand on UK mortgage market data. The choice of mortgage instrument is used to identify impatient debt maximizers and patient borrowers who borrow at intermediate levels. Thus the research confirms the conditions under which households will use the largest possible mortgage and the circumstances under which savings are invested in the property. A unique contribution of the work is the estimation of mortgage demand equations corrected for endogenous housing demand, for a single housing finance system, where borrowers face different opportunity costs of equity in their owner occupied property, allowing a purer test of the theoretical model.

Suggested Citation

  • David Leece, 2006. "Testing a theoretical model of mortgage demand on UK data," Applied Economics, Taylor & Francis Journals, vol. 38(17), pages 2037-2051.
    • Handle: RePEc:taf:applec:v:38:y:2006:i:17:p:2037-2051
    DOI: 10.1080/00036840500426959
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    Cited by:

    1. Eunice Tamoh Anu, 2016. "Investigating the Effectiveness of Mortgage Demand and the Significant Level of the Changes: Evidence from the Intervention of the Financial Crisis," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(4), pages 136-154, April.

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