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Consumption Effects of Mortgage Payment Holidays: Evidence during the COVID-19 Pandemic
Author:
Bruno Albuquerque
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Alexandra Varadi
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 044
Language:
English
Publication Date:
25 Feb 2022
DOI:
https://doi.org/10.5089/9798400203107.001
ISBN:
9798400203107
ISSN:
1018-5941
Pages:
58
Keywords:
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
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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.
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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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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 044