IDEAS home Printed from https://ideas.repec.org/p/kud/kucebi/2604.html

Consumption responses to rising mortgage rates: Unpacking the cash-flow channel of monetary policy

Author

Listed:
  • Asker Lau Andersen

    (Department of Economics, University of Copenhagen)

  • Andreas Jakobsen

    (Danske Bank, Copenhagen Business School)

  • Mads Rahbek Joergensen

    (Danske Bank, Department of Economics, University of Copenhagen)

  • Niels Johannesen

    (Oxford University Centre for Business Taxation, University of Copenhagen)

Abstract

We study the transmission of rising interest rates to consumption using granular customerdata from a major bank in Denmark. We show that households with adjustable-ratemortgages gradually reduced spending and increased deposits as market rates soared in 2022 but made no further spending cuts when their mortgage rates eventually reset to a higher level in 2023-2024. These patterns are consistent with forward-looking households who respond to new information about future mortgage costs and use liquid buffers to smooth consumption. The cash-flow channel of monetary policy may therefore operate almost instantaneously even when mortgage rates reset with a significant lag.

Suggested Citation

  • Asker Lau Andersen & Andreas Jakobsen & Mads Rahbek Joergensen & Niels Johannesen, 2026. "Consumption responses to rising mortgage rates: Unpacking the cash-flow channel of monetary policy," CEBI working paper series 26-04, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2604
    as

    Download full text from publisher

    File URL: https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_04-26.Rev.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kud:kucebi:2604. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Hoffmann (email available below). General contact details of provider: https://edirc.repec.org/data/cebkudk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.