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

Consumption Effects of Mortgage Payment Holidays: Evidence during the COVID-19 Pandemic
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Volume/Issue: Volume 2022 Issue 044
Publication date: February 2022
ISBN: 9798400203107
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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Economics- Macroeconomics , Economics / General , Mortgage payment holidays , Household behaviour , Consumption , High-frequency data , Difference-in-differences , Panel data , mortgage PH , liquidity-constrained household , PH duration , PH application , Mortgages , Income , Income shocks

Also of interest
August 2009 Working Papers
April 2010
March 2010
January 2010
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.

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