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Households’ Mortgage-Rate Expectations: More Realistic than at First Glance?

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Abstract

Household expectations of future mortgage rates elicited over the last few years might appear unrealistically low. However, taking explicit account of the high persistence in interest rates, we find that Swedish households’ implied long-term expectation of mortgage rates is around 4.7 percent. This number lines up well with the long-term expectation that can be deduced from the Riksbank’s assessment of the repo rate in the long run and the typical spread between the mortgage rate and the repo rate. Our analysis makes use of household mortgage rate expectations at three different horizons, which enables an explicit modelling of the “term-structure” of household forecasts.

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  • Hjalmarsson, Erik & Österholm, Pär, 2017. "Households’ Mortgage-Rate Expectations: More Realistic than at First Glance?," Working Papers 2017:9, Örebro University, School of Business.
    • Handle: RePEc:hhs:oruesi:2017_009
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    Cited by:

    1. Kladivko, Kamil & Österholm, Pär, 2020. "Can Households Predict where the Macroeconomy is Headed?," Working Papers 2020:11, Örebro University, School of Business.
    2. Hjalmarsson, Erik & Österholm, Pär, 2019. "A micro-data analysis of households’ expectations of mortgage rates," Economics Letters, Elsevier, vol. 185(C).

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    More about this item

    Keywords

    Survey data; Household expectations; Mortgage rates.;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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