Consumption Effects of Mortgage Payment Holidays: Evidence during the COVID-19 Pandemic
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
We use UK transaction-level data during the Covid-19 pandemic to study whether mortgage payment holidays (PH) can act as a mechanism for smoothing household consumption following negative aggregate shocks. Our results suggest that mortgage PH were accessed by both households with pre-existing financial vulnerabilities and by those with stronger balance sheets, including buy-to-let investors. We also find that the temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those non-eligible for the policy. Finally, we find that mortgage PH led to higher saving rates for more financially-stable households.
Series:
Working Paper No. 2022/044
Subject:
Consumption Financial crises Financial institutions Income Income shocks Mortgages National accounts
Frequency:
regular
English
Publication Date:
February 25, 2022
ISBN/ISSN:
9798400203107/1018-5941
Stock No:
WPIEA2022044
Pages:
58
Please address any questions about this title to publications@imf.org