IDEAS home Printed from https://ideas.repec.org/a/oup/qjecon/v139y2024i3p1767-1825..html
   My bibliography  Save this article

The Mortgage Piggy Bank: Building Wealth Through Amortization

Author

Listed:
  • Asaf Bernstein
  • Peter Koudijs

Abstract

In 2013, the Dutch government mandated that new conforming mortgages must fully amortize. Within a difference-in-differences design, we estimate that the marginal wealth accumulation from amortization is close to one, even five years later. Households purchasing after the reform primarily cut consumption and leisure over other savings, leading to a rise in wealth. This holds if we use life events to instrument for the timing of home purchase. Estimates are similar for seemingly unconstrained households and movers, suggesting a broad applicability of our results. Consistent with a simple model, we find lower estimates for households that appear less financially sophisticated or willing to adjust short-term consumption. Mortgage amortization schedules are among the largest savings plans in the world, and our results highlight their critical importance for household wealth building and macroprudential policies.

Suggested Citation

  • Asaf Bernstein & Peter Koudijs, 2024. "The Mortgage Piggy Bank: Building Wealth Through Amortization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(3), pages 1767-1825.
  • Handle: RePEc:oup:qjecon:v:139:y:2024:i:3:p:1767-1825.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/qje/qjae011
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:qjecon:v:139:y:2024:i:3:p:1767-1825.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/qje .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.