IDEAS home Printed from https://ideas.repec.org/p/boe/boeewp/324.html
   My bibliography  Save this paper

Housing equity as a buffer: evidence from UK households

Author

Listed:
  • Andrew Benito

Abstract

The decision to extract home equity is examined using household-level data for the United Kingdom, 1993 to 2003. At its peak during the period, around one in ten homeowners withdrew equity per year. The paper finds that the equity withdrawal decision conforms to predictions from the standard life-cycle framework and models that predict its use as a financial buffer. The paper also estimates responses to the large house price appreciation and significant reductions in mortgage rates seen during the period. This has implications for the size of the ‘collateral channel’ and credit channel models of monetary policy.

Suggested Citation

  • Andrew Benito, 2007. "Housing equity as a buffer: evidence from UK households," Bank of England working papers 324, Bank of England.
  • Handle: RePEc:boe:boeewp:324
    as

    Download full text from publisher

    File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2007/WP324.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Aoki, Kosuke & Proudman, James & Vlieghe, Gertjan, 2004. "House prices, consumption, and monetary policy: a financial accelerator approach," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 414-435, October.
    2. Garcia, Rene & Lusardi, Annamaria & Ng, Serena, 1997. "Excess Sensitivity and Asymmetries in Consumption: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 154-176, May.
    3. Christopher D. Carroll & Karen E. Dynan & Spencer D. Krane, 2003. "Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 586-604, August.
    4. Andrew Benito & Haroon Mumtaz, 2006. "Consumption excess sensitivity, liquidity constraints and the collateral role of housing," Bank of England working papers 306, Bank of England.
    5. John Y. Campbell & João F. Cocco, 2003. "Household Risk Management and Optimal Mortgage Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1449-1494.
    6. James Banks & Richard Blundell & Zoë Oldfield & James P. Smith, 2016. "House Price Volatility and the Housing Ladder," NBER Chapters,in: Insights in the Economics of Aging, pages 87-119 National Bureau of Economic Research, Inc.
    7. Steven F. Venti & David A. Wise, 1989. "Aging, Moving, and Housing Wealth," NBER Chapters,in: The Economics of Aging, pages 9-54 National Bureau of Economic Research, Inc.
    8. Raj Chetty & Adam Szeidl, 2016. "Consumption Commitments and Habit Formation," Econometrica, Econometric Society, vol. 84, pages 855-890, March.
    9. Orazio Attanasio & Laura Blow & Robert Hamilton & Andrew Leicester, 2005. "Consumption, house prices and expectations," Bank of England working papers 271, Bank of England.
    10. Campbell, John Y. & Cocco, Joao F., 2007. "How do house prices affect consumption? Evidence from micro data," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 591-621, April.
    11. Viola Angelini & Peter Simmons, "undated". "Housing Debt, Employment Risk and Consumption," Discussion Papers 05/07, Department of Economics, University of York.
    12. Andrew Benito, 2006. "Does job insecurity affect household consumption?," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 157-181, January.
    13. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
    14. repec:nsr:niesrd:59 is not listed on IDEAS
    15. Miles, David, 1992. "Housing markets, consumption and financial liberalisation in the major economies," European Economic Review, Elsevier, vol. 36(5), pages 1093-1127, June.
    16. Sebastian Barnes & Gregory Thwaites, 2005. "'Real-world' mortgages, consumption volatility and the low inflation environment," Bank of England working papers 273, Bank of England.
    17. Boheim, Rene & Ermisch, John, 2001. " Partnership Dissolution in the UK--The Role of Economic Circumstances," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 197-208, May.
    18. Rabe-Hesketh, Sophia & Skrondal, Anders & Pickles, Andrew, 2005. "Maximum likelihood estimation of limited and discrete dependent variable models with nested random effects," Journal of Econometrics, Elsevier, vol. 128(2), pages 301-323, October.
    19. James Banks & Richard Blundell & James P. Smith, 2002. "Wealth Portfolios in the UK and the US," NBER Working Papers 9128, National Bureau of Economic Research, Inc.
    20. Sophia Rabe-Hesketh & Anders Skrondal & Andrew Pickles, 2004. "GLLAMM Manual," U.C. Berkeley Division of Biostatistics Working Paper Series 1160, Berkeley Electronic Press.
    21. Andrew Benito, 2006. "How does the down-payment constraint affect the UK housing market?," Bank of England working papers 294, Bank of England.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew Benito & Jumana Saleheen, 2013. "Labour Supply as a Buffer: Evidence from UK Households," Economica, London School of Economics and Political Science, vol. 80(320), pages 698-720, October.
    2. Márquez, Elena & Martínez-Cañete, Ana R. & Pérez-Soba, Inés, 2013. "Wealth shocks, credit conditions and asymmetric consumption response: Empirical evidence for the UK," Economic Modelling, Elsevier, vol. 33(C), pages 357-366.
    3. Manuela Deidda, 2015. "Economic Hardship, Housing Cost Burden and Tenure Status: Evidence from EU-SILC," Journal of Family and Economic Issues, Springer, vol. 36(4), pages 531-556, December.
    4. Beverley Searle, 2011. "Recession and housing wealth," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(1), pages 33-48, April.

    More about this item

    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:boe:boeewp:324. 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). General contact details of provider: http://edirc.repec.org/data/boegvuk.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.