Housing, Mortgages, and Self-control

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Abstract

Using a quantitative theoretical framework this paper analyzes how problems of self-control influence housing and mortgage decisions. The results show that people with stronger problems of self-control are less likely to become homeowners, even though houses serve as commitment for saving. The paper then investigates the welfare effects of regulating mortgage products if people differ in their degree of self-control. Holding house prices fixed, higher down payment requirements and restrictions on refinancing turn out to be beneficial to people with sufficiently strong problems of self-control, even though these policies restrict access to the commitment device.
Original languageEnglish
JournalReview of Financial Studies
Number of pages40
ISSN0893-9454
Publication statusPublished - 16 Sep 2020

Bibliographical note

Epub ahead of print. Published online: 16 September 2020

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