Mortgage Market Design and Wealth Inequality: Evidence from Interest-only Mortgages

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Macro, Risk and Sustainability Seminar: Claes Bäckman Mortgage Market Design and Wealth Inequality: Evidence from Interest-only Mortgages

The Department of Economics invites you to a Macro, Risk and Sustainability Seminar with Claes Bäckman , Leibniz Institute for Financial Research SAFE.

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If you have any questions regarding the seminar, please contact the seminar organizers Krisztina Molnar or Camilla Nesfossen Hopsdal

Abstract

Mortgage amortization payments require household to save and build up wealth in the form of home equity, but also restricts portfolio choice. Using a mortgage market reform in Denmark, we show that interest-only mortgages are U-shaped across the wealth distribution. Across the wealth distribution, households chose to save less after choosing interest-only mortgages. Overall, our results highlight that mortgage market design affects savings and wealth for a large fraction of households.