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The economic consequences of mortgage debt

By Geoff Meen

Abstract

Unsurprisingly, a great deal of attention has been paid to the economic consequences of the credit crunch. However, this paper shows that the credit crunch was preceded by a strong build-up of mortgage debt internationally, which, in the long run, could turn out to be more significant than the credit crunch itself. Indeed, the debt build-up suggests that the credit crunch is more likely to reoccur, because highly-indebted households have weaker buffers to withstand unexpected shocks to their incomes or to interest rates. The paper presents a model that can explain the debt build-up and changes to the distribution of debt between existing owners and first-time buyers, which hinders access to home-ownership for the latter, even amongst those households who would be considered as credit-worthy

Publisher: Springer
Year: 2011
OAI identifier: oai:centaur.reading.ac.uk:21591
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  • http://dx.doi.org/10.1007/s109... (external link)
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