TY  - UNPD
A1  - Bäckman, Claes
A1  - Moran, Patrick
A1  - Santen, Peter van
T1  - Mortgage design, repayment schedules, and household borrowing
N2  - How does the design of debt repayment schedules affect household borrowing? To answer this question, we exploit a Swedish policy reform that eliminated interest-only mortgages for loan-to-value ratios above 50%. We document substantial bunching at the threshold, leading to 5% lower borrowing. Wealthy borrowers drive the results, challenging credit constraints as the primary explanation. We develop a model to evaluate the mechanisms driving household behavior and find that much of the effect comes from households experiencing ongoing flow disutility to amortization payments. Our results indicate that mortgage contracts with low initial payments substantially increase household borrowing and lifetime interest costs.
T3  - SAFE working paper - 421 
KW  - Mortgage design
KW  - Amortization payments
KW  - Macroprudential policy
KW  - Bunching
Y1  - 2024
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/71577
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-715777
UR  - https://ssrn.com/abstract=4854975
N1  - Funding: Leibniz Institute for Financial Research SAFE
N1  - JEL-Klassifikation: G5 Household Finance / G51 Household Saving, Borrowing, Debt, and Wealth
PB  - SAFE
CY  - Frankfurt am Main
ER  -