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Monetary Policy and the Homeownership Rate

Author

Listed:
  • James Graham
  • Avish Sharma

Abstract

Monetary policy affects not only the spending of existing homeowners, but also whether and when to become a homeowner in the first place. We study this transmission mechanism in Australia, a country with a high cost of housing, adjustable-rate mortgages, and serviceability-based borrowing constraints. We build a heterogeneous-agent life-cycle model, where the macroeconomic effects of monetary policy are due to an exogenous VAR. A contractionary shock reduces homeownership for over a decade. Homeownership dynamics depend on interest rates, incomes, borrowing constraints, and household expectations about monetary policy. Finally, the welfare costs of monetary shocks are heavily concentrated among potential homebuyers.

Suggested Citation

  • James Graham & Avish Sharma, 2024. "Monetary Policy and the Homeownership Rate," CAMA Working Papers 2024-43, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University, revised Jul 2026.
    • Handle: RePEc:een:camaaa:2024-43
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    File URL: https://crawford.anu.edu.au/sites/default/files/2026-07/43_2024_Graham_Sharma.pdf
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    File URL: https://crawford.anu.edu.au/sites/default/files/2026-07/43a_2024_Graham_Sharma.pdf
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    Cited by:

    1. James Graham, 2026. "A Structural Model of Mortgage Offset Accounts in the Australian Housing Market," The Economic Record, The Economic Society of Australia, vol. 102(336), pages 3-26, March.
    2. James Graham, 2024. "A Structural Model of Mortgage Offset Accounts in the Australian Housing Market," CAMA Working Papers 2024-35, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

    More about this item

    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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