Using a long span of expenditure survey data and a new narrative measure of exogenous income tax changes for the United Kingdom, we show that households with mortgage debt exhibit large and persistent consumption responses to changes in their income. Homeowners without a mortgage, in contrast,...

In response to an interest rate change, mortgagors in the United Kingdom and United States adjust their spending significantly (especially on durable goods) but outright home-owners do not. While the dollar change in mortgage payments is nearly three times larger in the United Kingdom than in...

How do changes in monetary policy affect consumption? Using household data for the US and the UK, we show that most of the aggregate response of consumption to interest rates is driven by households with a mortgage. Outright home owners do not adjust expenditure at all and renters change their...