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Mortgage indebtedness and household financial distress

  • Georgarakos, Dimitris
  • Lojschová, Adriana
  • Ward-Warmedinger, Melanie

Using comparable survey data from twelve European countries from 1994 to 2001 we investigate households’ attitudes towards mortgage indebtedness. We find that a given debt burden creates much higher distress in countries with fewer mortgage holders relative to countries where a significant part of households uses mortgage debt. This effect is net of ppp-adjusted income levels, various socioeconomic characteristics, housing traits, country-specific constant terms, and household unobserved heterogeneity. We show that households evaluate their own debt burden partly in comparison with the debt position of their peer group and in a way consistent with social stigma considerations which lessen in significance as markets expand. JEL Classification: D12, D14, G21

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Paper provided by European Central Bank in its series Working Paper Series with number 1156.

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Date of creation: Feb 2010
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Handle: RePEc:ecb:ecbwps:20101156
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