Past research argues that changes in adjustable-rate mortgage (ARM) payments may lead households to cut back on consumption or to default on their mortgages. In this paper, we argue that these outcomes are more likely if ARM borrowers are borrowing constrained, and find that ARM borrowers...

We propose a novel approach to estimate household income uncertainty at various future horizons and characterize how the estimated uncertainty evolves over the life cycle. We measure income uncertainty as the variance of linear forecast errors conditional on information available to households...