Responses to Saving Commitments: Evidence from Mortgage Run-offs

Steffen Andersen; Philippe d’Astous; Stephen H. Shore; Jimmy Martínez-Correa

Responses to Saving Commitments: Evidence from Mortgage Run-offs

Steffen Andersen, Philippe d’Astous, Stephen H. Shore, Jimmy Martínez-Correa

Research output: Contribution to conference › Paper › Research › peer-review

Abstract

We study consumers’ responses to removing a saving constraint. Mortgage run-offs predictably relax a saving constraint for borrowers whose mortgage committed them to save by paying down principal. Using the entire Danish population, we identify mortgages on track to run off between 1995 and 2014. We measure the effect of run-offs on earnings and the household balance sheet. We find that borrowers use 39 percent of previous mortgage
payments to decrease labor income, and use 53 percent to pay down other debts. Borrowers run up non-mortgage debt prior to the run-off and this run-up stops once the mortgage is repaid.

Original language	English
Publication date	2019
Number of pages	43
Publication status	Published - 2019
Event	2019 Financial Management Association Global Conference in Latin America - Pontificia Universidad Javeriana, Bogota, Colombia Duration: 22 May 2019 → 24 May 2019 https://www.fma.org/bogota

Conference

Conference	2019 Financial Management Association Global Conference in Latin America
Location	Pontificia Universidad Javeriana
Country/Territory	Colombia
City	Bogota
Period	22/05/2019 → 24/05/2019
Internet address	https://www.fma.org/bogota

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http://www.fmaconferences.org/Bogota/Papers/ResponsestoSavingCommitments-EvidencefromMortgageRunoffs.pdfLicence: Unspecified

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Cite this

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title = "Responses to Saving Commitments: Evidence from Mortgage Run-offs",

abstract = "We study consumers{\textquoteright} responses to removing a saving constraint. Mortgage run-offs predictably relax a saving constraint for borrowers whose mortgage committed them to save by paying down principal. Using the entire Danish population, we identify mortgages on track to run off between 1995 and 2014. We measure the effect of run-offs on earnings and the household balance sheet. We find that borrowers use 39 percent of previous mortgagepayments to decrease labor income, and use 53 percent to pay down other debts. Borrowers run up non-mortgage debt prior to the run-off and this run-up stops once the mortgage is repaid.",

author = "Steffen Andersen and Philippe d{\textquoteright}Astous and Shore, {Stephen H.} and Jimmy Mart{\'i}nez-Correa",

year = "2019",

language = "English",

note = "2019 Financial Management Association Global Conference in Latin America ; Conference date: 22-05-2019 Through 24-05-2019",

url = "https://www.fma.org/bogota",

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Andersen, S, d’Astous, P, Shore, SH & Martínez-Correa, J 2019, 'Responses to Saving Commitments: Evidence from Mortgage Run-offs', Paper presented at 2019 Financial Management Association Global Conference in Latin America, Bogota, Colombia, 22/05/2019 - 24/05/2019. <http://www.fmaconferences.org/Bogota/Papers/ResponsestoSavingCommitments-EvidencefromMortgageRunoffs.pdf>

TY - CONF

T1 - Responses to Saving Commitments

T2 - 2019 Financial Management Association Global Conference in Latin America

AU - Andersen, Steffen

AU - d’Astous, Philippe

AU - Shore, Stephen H.

AU - Martínez-Correa, Jimmy

PY - 2019

Y1 - 2019

N2 - We study consumers’ responses to removing a saving constraint. Mortgage run-offs predictably relax a saving constraint for borrowers whose mortgage committed them to save by paying down principal. Using the entire Danish population, we identify mortgages on track to run off between 1995 and 2014. We measure the effect of run-offs on earnings and the household balance sheet. We find that borrowers use 39 percent of previous mortgagepayments to decrease labor income, and use 53 percent to pay down other debts. Borrowers run up non-mortgage debt prior to the run-off and this run-up stops once the mortgage is repaid.

AB - We study consumers’ responses to removing a saving constraint. Mortgage run-offs predictably relax a saving constraint for borrowers whose mortgage committed them to save by paying down principal. Using the entire Danish population, we identify mortgages on track to run off between 1995 and 2014. We measure the effect of run-offs on earnings and the household balance sheet. We find that borrowers use 39 percent of previous mortgagepayments to decrease labor income, and use 53 percent to pay down other debts. Borrowers run up non-mortgage debt prior to the run-off and this run-up stops once the mortgage is repaid.

M3 - Paper

Y2 - 22 May 2019 through 24 May 2019

ER -