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The causal effect of house prices on mortgage demand and mortgage supply

  • Christoph Basten
  • Cathérine Koch

We identify the causal effect of house prices on mortgage demand and supply in Switzerland by exploiting exogenous shocks to immigration and thereby to house prices. Detailed micro data allow us to observe multiple offers for each mortgage request. We find a 1% increase in house prices to raise the requested mortgage amount by 0.52%. Due to positive feedback effects, the entire partial correlation is 0.78%. While we find higher house prices to increase mortgage demand, they induce banks to make fewer offers and charge higher rates, especially later in the boom and especially for highly leveraged households.

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File URL: http://www.econ.uzh.ch/static/wp/econwp140.pdf
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Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 140.

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Date of creation: Feb 2014
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Handle: RePEc:zur:econwp:140
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  17. Manuel Adelino & Antoinette Schoar & Felipe Severino, 2012. "Credit Supply and House Prices: Evidence from Mortgage Market Segmentation," NBER Working Papers 17832, National Bureau of Economic Research, Inc.
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