In this paper, we evaluate Danish homeowners' interest-rate sensitivity in terms of the partial effect of a 1 percentage point increase in interest rates on homeowners cash flows and balance sheets. We construct two measures to quantify the effect of an increase in interest rates on homeowners....

We estimate the "unhedged interest rate exposure" (URE) of euro area households. The URE is a welfare metric that captures the extent to which households are exposed to changes in real interest rates, and reflects the direct gains and losses in interest income flows incurred by households after...

This paper demonstrates that credit reporting -- banks observing households' default histories -- can cause slow recoveries of housing prices and employment from mortgage crises. Comparing credit cycles with and without credit reporting and capturing the impact of mortgage default on employment...

Buying a house changes a household's balance sheet by simultaneously reducing liquidity and introducing mortgage payments, which may leave the household more exposed to other shocks. We find that this change affects credit card use in two ways: A debt effect increases credit card spending, while...

During the Great Recession, the collapse of consumption across the U.S. varied greatly but systematically with house-price declines. We find that financial distress among U.S. households amplified the sensitivity of consumption to house-price shocks. We uncover two essential facts: (1) the...

Using Danish household level data, we find that a relatively large share of total interest-only mortgage debt is held by families with few liquid assets and high loan to value ratios. This may arise because families with interest-only loans do not fully use the lower instalments to increase...

This research investigated the relationship between increasing housing prices (or housing wealth) and the increased consumption expenditure of households from before the GFC and afterwards. The analysis revealed that following the GFC, old and middle-aged households showing slightly lower...

We study the causal effect of mortgage rate changes on consumer spending, debt repayment, and defaults during an expansionary and a contractionary monetary policy episode in Canada. Our identification takes advantage of the fact that the interest rates of short-term fixed-rate mortgages (the...

Using a representative sample of credit card holders from a Chinese commercial bank with a 10% credit card market share, we investigate how consumers respond to an unexpected interest rate decrease that automatically reduces interest expenses for all mortgagors in the country and thereby...