Consumption Effects of Mortgage Payment Holidays: Evidence during the COVID-19 Pandemic

February 25, 2022

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Format: Chicago

Bruno Albuquerque, and Alexandra Varadi. Consumption Effects of Mortgage Payment Holidays: Evidence during the COVID-19 Pandemic, (USA: International Monetary Fund, 2022) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We use UK transaction-level data during the Covid-19 pandemic to study whether mortgage payment holidays (PH) can act as a mechanism for smoothing household consumption following negative aggregate shocks. Our results suggest that mortgage PH were accessed by both households with pre-existing financial vulnerabilities and by those with stronger balance sheets, including buy-to-let investors. We also find that the temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those non-eligible for the policy. Finally, we find that mortgage PH led to higher saving rates for more financially-stable households.

Subject: Consumption, Financial crises, Financial institutions, Income, Income shocks, Mortgages, National accounts

Keywords: Consumption, Difference-in-differences, High-frequency data, Household behaviour, Income, Income shocks, Liquidity-constrained household, Mortgage payment holidays, Mortgage PH, Mortgages, Panel data, PH application, PH duration

Publication Details

Pages:

58
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/044
Stock No:

WPIEA2022044
ISBN:

9798400203107
ISSN:

1018-5941

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