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Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia

Author

Listed:
  • Hofstetter, Marc
  • Tovar, Jorge
  • Urrutia, Miguel

Abstract

Government intervention in the construction sector as a way to boost the economy has been a constant in Colombia for the past 90 years. This paper explicitly tests the impact of the most recent of such interventions: a subsidy to the mortgage interest rate. The results show that the subsidy boosted mortgage loans by around 38 percent. However, it is also found that real interest rates went up by 09 percent, i.e., there has been an incomplete pass-through of the subsidy to the consumer. The pass-through of this instance of intervention is estimated to be in the range of 65 percent to 74 percent.

Suggested Citation

  • Hofstetter, Marc & Tovar, Jorge & Urrutia, Miguel, 2011. "Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia," IDB Publications (Working Papers) 3106, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:3106
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    References listed on IDEAS

    as
    1. Nicolás Cuervo & Samuel Jaramillo, 2009. "Dos décadas de política de vivienda en Bogotá apostando por el mercado," Documentos CEDE 6651, Universidad de los Andes, Facultad de Economía, CEDE.
    2. Arturo José Galindo & Marc Hofstetter, 2008. "Mortgage Interest Rates, Country Risk and Maturity Matching in Colombia," Documentos CEDE 4544, Universidad de los Andes, Facultad de Economía, CEDE.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Gan-Ochir Doojav & Davaasukh Damdinjav, 2021. "Policy-Driven Boom and Bust in the Housing Market: Evidence from Mongolia," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 38(02), pages 279-317, September.
    2. Vanessa Cediel Sánchez & Carlos Velásquez Vega, 2015. "¿Hay una burbuja inmobiliaria en Bogotá? Un estudio por segmentos de mercado," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 17(32), pages 233-357, January-J.
    3. Juan Esteban Carranza, 2011. "La indexación de los saldos hipotecarios y la crisis colombiana de final de siglo XX," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, May.

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    More about this item

    Keywords

    IDB-WP-257; Mortgage loans; Mortgage interest rate subsidy; History of mortgage loans in Colombia;
    All these keywords.

    JEL classification:

    • N96 - Economic History - - Regional and Urban History - - - Latin America; Caribbean
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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