Working Paper: Housing wealth effects and mortgage borrowing

Working Paper - January 2019 - No. 133

Authors Andersen, Henrik Yde (Danmarks Nationalbank); Leth-Petersen, Søren (Københavns Universitet)
Subject household balance sheets; Housing finance
Type Working paper
Year 2019
Published 24 January 2019
We investigate the co-movement of house prices, home equity extraction and consumption in Denmark. Using survey data we develop a measure for unanticipated house price changes which can be merged on Danish administrative data. Thus, we can show how home owners who experience an unexpected positive house price shock extract home equity and increase spending. We find that the effect is driven by home owners who could potentially benefit from refinancing existing mortgages. This indicates that the wealth effect is intimately connected to the functioning of the mortgage market.