Modelling and Forecasting UK Mortgage Arrears and Possessions
This paper presents new models for aggregate UK data on mortgage possessions (foreclosures) and mortgage arrears (payment delinquencies). The innovations include the treatment of difficult to observe variations in loan quality and shifts in forbearance policy by lenders, by common latent variables estimated in a system of equations for arrears and possessions, for quarterly data over 1983-2009. A second innovation is the theory-justified use of an estimate of the proportion of mortgages in negative equity, based on an average debt to equity ratio, as one of the key drivers of possessions and arrears. A third is the systematic treatment of measurement bias in the months in arrears measures. Finally, the paper does not impose a proportional long-run relationship between possessions and arrears assumed in the previous UK literature. A range of economic forecast scenarios for forecasts to 2013 reveals the sensitivity of mortgage possessions and arrears to different economic conditions, highlighting potential risks faced by the UK and its mortgage lenders. A comprehensive review of data on arrears and possessions completes the paper.
|Date of creation:||Aug 2010|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp|
References listed on IDEAS
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.:
- Gavin Cameron & John Muellbauer & Anthony Murphy, 2006.
"Was There A British House Price Bubble? Evidence From A Regional Panel,"
eres2006_150, European Real Estate Society (ERES).
- Cameron, Gavin & Muellbauer, John & Murphy, Anthony, 2006. "Was There a British House Price Bubble? Evidence from a Regional Panel," CEPR Discussion Papers 5619, C.E.P.R. Discussion Papers.
- John Muellbauer & Gavin Cameron & John Muellbauer, 2006. "Was There A British House Price Bubble? Evidence from a Regional Panel," Economics Series Working Papers 276, University of Oxford, Department of Economics.
- Kristopher S. Gerardi & Andreas Lehnert & Shane M. Sherlund & Paul S. Willen, 2009.
"Making sense of the subprime crisis,"
FRB Atlanta Working Paper
2009-02, Federal Reserve Bank of Atlanta.
- Wadhwani, Sushil B, 1986. "Inflation, Bankruptcy, Default Premia and the Stock Market," Economic Journal, Royal Economic Society, vol. 96(381), pages 120-38, March.
- Christopher L. Foote & Kristopher S. Gerardi & Paul S. Willen, 2008.
"Negative equity and foreclosure: theory and evidence,"
Public Policy Discussion Paper
08-3, Federal Reserve Bank of Boston.
- Foote, Christopher L. & Gerardi, Kristopher & Willen, Paul S., 2008. "Negative equity and foreclosure: Theory and evidence," Journal of Urban Economics, Elsevier, vol. 64(2), pages 234-245, September.
- Catarina Figueira & John Glen & Joseph Nellis, 2005. "A Dynamic Analysis of Mortgage Arrears in the UK Housing Market," Urban/Regional 0509006, EconWPA.
- Lambrecht, Bart & Perraudin, William & Satchell, Stephen, 1997.
"Time to default in the UK mortgage market,"
Elsevier, vol. 14(4), pages 485-499, October.
- John Gathergood, . "Income Shocks, Mortgage Repayment Risk and Financial Distress Among UK Households," Discussion Papers 09/03, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
- F J Breedon & M A S Joyce, 1993. "House prices, arrears and possessions: A three equation model for the UK," Bank of England working papers 14, Bank of England.
- Catarina Figueira & John Glen & Joseph Nellis, 2005. "A Dynamic Analysis of Mortgage Arrears in the UK Housing Market," Urban Studies, Urban Studies Journal Limited, vol. 42(10), pages 1755-1769, September.
- Kau James B. & Keenan Donald C. & Kim Taewon, 1994. "Default Probabilities for Mortgages," Journal of Urban Economics, Elsevier, vol. 35(3), pages 278-296, May.
- Yongheng Deng & John M. Quigley & Robert Van Order, .
"Mortgage Terminations, Heterogeneity and the Exercise of Mortgage Options,"
Zell/Lurie Center Working Papers
322, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
- Yongheng Deng & John M. Quigley & Robert Van Order, 2000. "Mortgage Terminations, Heterogeneity and the Exercise of Mortgage Options," Econometrica, Econometric Society, vol. 68(2), pages 275-308, March.
- Deng, Yongheng & Quigley, John M. & Van Order, Robert, 1999. "Mortgage Terminations, Heterogeneity, and the Exercise of Mortgage Options," Berkeley Program on Housing and Urban Policy, Working Paper Series qt96r560pg, Berkeley Program on Housing and Urban Policy.
- BÃ¶heim, RenÃ© & Taylor, Mark P., 2000.
"My home was my castle: evictions and repossessions in Britain,"
ISER Working Paper Series
2000-04, Institute for Social and Economic Research.
- Boheim, Rene & Taylor, Mark P., 2000. "My Home Was My Castle: Evictions and Repossessions in Britain," Journal of Housing Economics, Elsevier, vol. 9(4), pages 287-319, December.
- Ncube, M. & Satchell, S.E., 1995. "Modelling U.K. Mortgage Defaults Using a Hazard Approach Based on American Options," Cambridge Working Papers in Economics 9408, Faculty of Economics, University of Cambridge.
- John Whitley & Richard Windram & Prudence Cox, 2004. "An empirical model of household arrears," Bank of England working papers 214, Bank of England.
- Patrick Bajari & Chenghuan Sean Chu & Minjung Park, 2008. "An Empirical Model of Subprime Mortgage Default From 2000 to 2007," NBER Working Papers 14625, National Bureau of Economic Research, Inc.
- Brookes, Martin & Dicks, Mike & Pradhan, Mahmood, 1994. "An empirical model of mortgage arrears and repossessions," Economic Modelling, Elsevier, vol. 11(2), pages 134-144, April.
- Lambrecht, Bart M & Perraudin, William R M & Satchell, Steven, 2003. " Mortgage Default and Possession under Recourse: A Competing Hazards Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 425-42, June.
When requesting a correction, please mention this item's handle: RePEc:cep:sercdp:0052. 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: ()
If references are entirely missing, you can add them using this form.