Household mortgage demand: a study of the UK, Australia and Japan

PurposeHomeownership has been the main focus of housing policies in most countries. Typical means that households use to achieve homeownership is to take out a loan and supplement this with accumulated wealth for a downpayment. This paper aims to analyze the mortgage demand behavior of households in the UK, Australia and Japan.Design/methodology/approachUsing three panel data sets, HILDA for Australia, KHPS for Japan and USS for the UK, the paper estimates three equations using ordinary least squares: mortgage demand function, housing demand function and initial loan to value ratio function.FindingsThough homeownership is a preferred tenure and the mortgages are “recourse” loans, housing markets in these three countries operate in different mortgage market institutional structures. Results indicate that income elasticity of mortgage demand differ despite income elasticity of housing demand being similar. Different mortgage institutions in countries that pose constraints for borrowers also determine mortgage demand. Other factors such as demography and economic conditions have also played an important role in determining mortgage and housing demand.Originality/valueThe paper is first, to the authors’ knowledge, that explores the role of institutions in mortgage demand in a comparative framework for the UK, Japan and Australia.

The Interest Rate Elasticity of Mortgage Demand: Evidence from Bunching at the Conforming Loan Limit

This paper provides novel estimates of the interest rate elasticity of mortgage demand by measuring the degree of bunching in response to a discrete jump in interest rates at the conforming loan limit—the maximum loan size eligible for purchase by Fannie Mae and Freddie Mac. The estimates indicate that a 1 percentage point increase in the rate on a 30-year fixed-rate mortgage reduces first mortgage demand by between 2 and 3 percent. One-third of this response is driven by borrowers who take out second mortgages, which implies that total mortgage debt only declines by 1.5 to 2 percent. (JEL D14, G21, R21, R31)

DETERMINANTS OF DEMAND FOR MORTGAGE FINANCE IN KENYA: A CASE OF NAIROBI COUNTY

Purpose: The purpose of the study was to determine the determinants for the demand of mortgage finance in Kenya.Methodology: The study adopted a descriptive research design. The target population of this study was applicants for mortgage finance. Random sampling technique was used. The sample size was 384 respondents. Data was collected using structured questionnaires. The collected primary data was analyzed using Statistical Package for Social Science (SPSS) version 20. A binary logistic regression analysis was conducted. The Pearson Product was used to analyze the data. The findings from the analysis were organized and summarized in form of percentages, means ratios and frequencies and presented using tables and pie charts.Results: The results indicated that the likelihood of cheap mortgage substitutes resulting to low demand for mortgage finance in Kenya was 4.911 times higher than more costly mortgage substitutes. The findings further indicated that the likelihood of high legal cost and high stump duty cost causing low mortgage demand are 2.550 and 2.274 times higher than when the costs are low. The findings also indicate that the likelihood of low income levels causing low demand for mortgage substitutes was 6.369 high than high income levels. Finally the findings indicate that the likelihood of lack of promotion causing low mortgage demand was 5.808 higher than having promotion.Unique contribution to theory, practice and policy: The study recommended that mortgage financing institutions should consider the cost of mortgage substitutes, cost of mortgage, income level and promotion in order to increase the demand for mortgage finance in Kenya.