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Mortgage Liquidity Shocks and Corporate Lending: Evidence from Household-Initiated Bank Balance Sheet Adjustment

Author

Listed:
  • Agarwal, Sumit
  • Mayordomo, Sergio
  • Rodriguez Moreno, Maria
  • Tarantino, Emanuele

Abstract

We study how household balance-sheet adjustments shape the transmission of monetary policy to bank credit supply. Using Spanish credit registry data around the ECB’s 2022–2023 rates hike, we show that high-income households with floating-rate mortgages accelerated repayments, generating bank-specific liquidity inflows. Banks more exposed to these inflows expanded credit to micro and small firms, while consumer credit, mortgages, and investment assets were unaffected. This reallocation did not increase delinquency or risk-taking. Our results complement alternative transmission channels and highlight a cross-segment mechanism linking household financial behavior to the bank lending channel, exploiting predetermined mortgage-rate exposure around monetary policy tightening.

Suggested Citation

  • Agarwal, Sumit & Mayordomo, Sergio & Rodriguez Moreno, Maria & Tarantino, Emanuele, 2026. "Mortgage Liquidity Shocks and Corporate Lending: Evidence from Household-Initiated Bank Balance Sheet Adjustment," CEPR Discussion Papers 21039, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21039
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • 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

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