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Collateral, output growth, mortgage spread volatility and subsidies in Colombia

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  • Martha López
  • Eduardo Sarmiento Gómez

Abstract

The housing sector is one of the most relevant in terms of economic and financial stability. Understanding its behavior can prevent bubbles and busts in the economy. There are many studies about the corporate bond’s spreads, but the studies about mortgage interest rate spread and its volatility remain scarce. Similarly, the analysis of the subsidies on the housing sector on different dimensions have not been investigated enough. We ask the questions: Which are the determinants of the mortgage interest rates at the micro level? What are the main determinants of mortgage interest rate spread and its volatility at the macro level? Is there room for macroprudential tools in the housing sector to improve financial stability in terms of credit growth? We analyze the mortgage interest rate using three datasets: the Data Register information from Colombia, an individual level social security dataset “PILA” and the data of country wide macroeconomic variables. Our findings are that collateral is an important variable that explains mortgage interest rates, an increase of 1% in collateral decreases the mortgage interest rate in 0.28%. The impact of a change of housing subsidies focalization on the assignation of the disbursements of the beneficiaries with respect to the individuals that do not use the subsidies is an increase with a difference of 1.02%. We found that a GARCH (1,1) model with output growth explains very well the spread volatility. **** RESUMEN: El sector de la vivienda es uno de los más relevantes en términos de estabilidad económica y financiera. Comprender su comportamiento puede prevenir burbujas y colapsos en la economía. Hay muchos estudios sobre los diferenciales de los bonos corporativos, pero los estudios sobre el diferencial de los tipos de interés hipotecarios y su volatilidad siguen siendo escasos. Del mismo modo, no se ha investigado lo suficiente el análisis de los subsidios al sector vivienda en diferentes dimensiones. Nos hacemos las preguntas: ¿Cuáles son los determinantes de las tasas de interés hipotecarias a nivel micro? ¿Cuáles son los principales determinantes del diferencial de tipos de interés hipotecarios y su volatilidad a nivel macro? ¿Hay margen para que las herramientas macroprudenciales en el sector inmobiliario mejoren la estabilidad financiera en términos de crecimiento del crédito? Analizamos la tasa de interés hipotecaria utilizando tres conjuntos de datos: la información del Registro de Datos de Colombia, un conjunto de datos de seguridad social a nivel individual "PILA" y los datos de variables macroeconómicas del país. Nuestros hallazgos son que la garantía es una variable importante que explica las tasas de interés hipotecarias, un aumento del 1% en la garantía disminuye la tasa de interés hipotecaria en 0.28%. El impacto de un cambio de focalización de los subsidios de vivienda en la asignación de los desembolsos de los beneficiarios respecto a las personas que no utilizan los subsidios es un aumento con una diferencia de 1.02%. Encontramos que un modelo GARCH (1,1) con crecimiento de la producción explica muy bien la volatilidad de los diferenciales.

Suggested Citation

  • Martha López & Eduardo Sarmiento Gómez, 2024. "Collateral, output growth, mortgage spread volatility and subsidies in Colombia," Borradores de Economia 1287, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:1287
    DOI: 10.32468/be.1287
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    References listed on IDEAS

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    More about this item

    Keywords

    Acelerador de multiplicadores; mercado hipotecario; pronóstico de volatilidad; subsidios a la vivienda; modelización econométrica; Multiplier accelerator; mortgage market; volatility forecasting; housing subsidies; econometric modelling;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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