House prices, arrears and possessions: A three equation model for the UK
The current slump in the UK housing market has coincided with record increases in mortgage arrears and possessions. Falling nominal house prices reduce the amount of unwithdrawn equity in housing and, under certain conditions, provide incentives for borrowers to accumulate arrears and for lenders to possess. However, possessions may themselves depress house prices. This paper attempts to analyse and quantify these interactions by estimating a three equation econometric model of UK mortgage arrears, possessions and house prices, in which expectations of future house prices are formed according to the rational expectations hypothesis. The model is simulated to examine the implications of interest rate changes and policies to reduce possessions.
|Date of creation:||Jun 1993|
|Date of revision:|
|Contact details of provider:|| Postal: Bank of England, Threadneedle Street, London, EC2R 8AH|
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
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.:
- James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 729-752.
- Wadhwani, Sushil B, 1986. "Inflation, Bankruptcy, Default Premia and the Stock Market," Economic Journal, Royal Economic Society, vol. 96(381), pages 120-38, March.
- Meen, Geoffrey P, 1990. "The Removal of Mortgage Market Constraints and the Implications for Econometric Modelling of UK House Prices," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(1), pages 1-23, February.
When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:14. See general 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: (Digital Media Team)
If references are entirely missing, you can add them using this form.