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Housing equity as a buffer: evidence from UK households

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  • Andrew Benito

Abstract

The decision to extract home equity is examined using household-level data for the United Kingdom, 1993 to 2003. At its peak during the period, around one in ten homeowners withdrew equity per year. The paper finds that the equity withdrawal decision conforms to predictions from the standard life-cycle framework and models that predict its use as a financial buffer. The paper also estimates responses to the large house price appreciation and significant reductions in mortgage rates seen during the period. This has implications for the size of the ‘collateral channel’ and credit channel models of monetary policy.

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  • Andrew Benito, 2007. "Housing equity as a buffer: evidence from UK households," Bank of England working papers 324, Bank of England.
    • Handle: RePEc:boe:boeewp:324
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    File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2007/WP324.pdf
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    Cited by:

    1. Andrew Benito & Jumana Saleheen, 2013. "Labour Supply as a Buffer: Evidence from UK Households," Economica, London School of Economics and Political Science, vol. 80(320), pages 698-720, October.
    2. Márquez, Elena & Martínez-Cañete, Ana R. & Pérez-Soba, Inés, 2013. "Wealth shocks, credit conditions and asymmetric consumption response: Empirical evidence for the UK," Economic Modelling, Elsevier, vol. 33(C), pages 357-366.
    3. Manuela Deidda, 2015. "Economic Hardship, Housing Cost Burden and Tenure Status: Evidence from EU-SILC," Journal of Family and Economic Issues, Springer, vol. 36(4), pages 531-556, December.
    4. Beverley Searle, 2011. "Recession and housing wealth," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 3(1), pages 33-48, April.

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