[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/sae/urbstu/v50y2013i12p2588-2607.html
   My bibliography  Save this article

Motivations for Equity Borrowing: A Welfare-switching Effect

Author

Listed:
  • Gavin Wood
  • Sharon Parkinson
  • Beverley Searle
  • Susan J. Smith
Abstract
During the early 2000s, mortgage market innovation together with home price appreciation increased the scope for mortgage equity withdrawal. From a macroeconomic perspective, this proved to be an important transmission mechanism for the wealth (particularly collateral) effects of housing. Microeconomic accounts of equity borrowing are less well developed, since standard models of savings and consumption rarely take housing wealth into account. This paper, however, builds on a small but growing literature assigning a precautionary savings role to consumption from housing wealth. The analysis uses panel data sourced from Britain and Australia to model households’ motivations for equity borrowing. Key among these motivations are pressing, uninsurable, ostensibly short-term, spending needs. In these contexts, it is proposed that equity borrowing assumes a welfare-switching role, substituting privately owned housing wealth for collectively funded safety-nets

Suggested Citation

  • Gavin Wood & Sharon Parkinson & Beverley Searle & Susan J. Smith, 2013. "Motivations for Equity Borrowing: A Welfare-switching Effect," Urban Studies, Urban Studies Journal Limited, vol. 50(12), pages 2588-2607, September.
    • Handle: RePEc:sae:urbstu:v:50:y:2013:i:12:p:2588-2607
    DOI: 10.1177/0042098013477706
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0042098013477706
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0042098013477706?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Christopher D. Carroll & Karen E. Dynan & Spencer D. Krane, 2003. "Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 586-604, August.
    2. Andrew Benito, 2009. "Who Withdraws Housing Equity and Why?," Economica, London School of Economics and Political Science, vol. 76(301), pages 51-70, February.
    3. Khandani, Amir E. & Lo, Andrew W. & Merton, Robert C., 2013. "Systemic risk and the refinancing ratchet effect," Journal of Financial Economics, Elsevier, vol. 108(1), pages 29-45.
    4. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    5. Gavin A. Wood & Peter A. Kemp, 2003. "The Taxation of Australian Landlords: Would the British Tax Treatment of Rental Investments Increase Tax Burdens if Introduced in Australia?," Urban Studies, Urban Studies Journal Limited, vol. 40(4), pages 747-765, April.
    6. Sharon Parkinson & Beverley Searle & Susan Smith & Alice Stoakes & Gavin Wood, 2009. "Mortgage Equity Withdrawal in Australia and Britain: Towards a Wealth-fare State?," European Journal of Housing Policy, Taylor and Francis Journals, vol. 9(4), pages 365-389.
    7. J. Benjamin & P. Chinloy, 2008. "Home Equity, Household Savings and Consumption," The Journal of Real Estate Finance and Economics, Springer, vol. 37(1), pages 21-32, July.
    8. John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 24(1), pages 1-33, spring.
    9. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
    10. Beverley Searle, 2011. "Recession and housing wealth," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 3(1), pages 33-48, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Declan French & Donal McKillop & Tripti Sharma, 2017. "Analysis of Housing Equity Withdrawal by its Forms," CHaRMS Working Papers 17-04, Centre for HeAlth Research at the Management School (CHaRMS).
    2. Bing Chen & Frank P. Stafford, 2016. "Stock Market Participation: Family Responses to Housing Consumption Commitments," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(4), pages 635-659, June.
    3. Susan J Smith & Melek Cigdem & Rachel Ong & Gavin Wood, 2017. "Wellbeing at the edges of ownership," Environment and Planning A, , vol. 49(5), pages 1080-1098, May.
    4. Bing Chen & Frank P. Stafford, 2019. "A Farewell to ARMs or Ever Changing Market Segments?," The Journal of Real Estate Finance and Economics, Springer, vol. 59(4), pages 649-672, November.
    5. Rachel Ong & Gavin A Wood & Melek Cigdem, 2022. "Housing wealth, mortgages and Australians’ labour force participation in later life," Urban Studies, Urban Studies Journal Limited, vol. 59(4), pages 810-833, March.
    6. Nicole Cook & Kristian Ruming, 2021. "The financialisation of housing and the rise of the investor-activist," Urban Studies, Urban Studies Journal Limited, vol. 58(10), pages 2023-2039, August.
    7. Gavin A. Wood & Rachel Ong, 2017. "The Australian Housing System: A Quiet Revolution?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 50(2), pages 197-204, June.
    8. Crommelin, Laura & Troy, Laurence & Martin, Chris & Parkinson, Sharon & Hayward, Richard Donald, 2018. "Technological disruption in private housing markets: the case of Airbnb," SocArXiv cb8z3, Center for Open Science.
    9. Tom Barnes, 2024. "Rethinking job loss in an age of assetisation: Lessons from the study of precarious older workers," Environment and Planning A, , vol. 56(3), pages 717-735, May.
    10. Beverley Searle, 2011. "Recession and housing wealth," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 3(1), pages 33-48, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ebner, André, 2013. "A micro view on home equity withdrawal and its determinants: Evidence from Dutch households," Journal of Housing Economics, Elsevier, vol. 22(4), pages 321-337.
    2. Declan French & Donal McKillop & Tripti Sharma, 2017. "Analysis of Housing Equity Withdrawal by its Forms," CHaRMS Working Papers 17-04, Centre for HeAlth Research at the Management School (CHaRMS).
    3. Chao He & Randall Wright & Yu Zhu, 2015. "Housing and Liquidity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 435-455, July.
    4. Ebrahim, M. Shahid & Shackleton, Mark B. & Wojakowski, Rafal M., 2011. "Participating mortgages and the efficiency of financial intermediation," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 3042-3054, November.
    5. Corina Boar & Denis Gorea & Virgiliu Midrigan, 2017. "Liquidity Constraints in the U.S. Housing Market," NBER Working Papers 23345, National Bureau of Economic Research, Inc.
    6. Stephanie Moulton & Donald Haurin & Samuel Dodini & Maximilian D. Schmeiser, 2016. "How Home Equity Extraction and Reverse Mortgages Affect the Credit Outcomes of Senior Households," Working Papers wp351, University of Michigan, Michigan Retirement Research Center.
    7. Dag Einar Sommervoll & Gavin Wood, 2011. "Home equity insurance," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 3(1), pages 66-85, April.
    8. Duca, John V. & Kumar, Anil, 2014. "Financial literacy and mortgage equity withdrawals," Journal of Urban Economics, Elsevier, vol. 80(C), pages 62-75.
    9. Ms. Rima A Turk, 2015. "Housing Price and Household Debt Interactions in Sweden," IMF Working Papers 2015/276, International Monetary Fund.
    10. John Muellbauer, 2015. "Housing and the Macroeconomy: Inflation and the Financial Accelerator," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 51-58, March.
    11. Albanesi, Stefania & DeGiorgi, Giacomo & Nosal, Jaromir, 2022. "Credit growth and the financial crisis: A new narrative," Journal of Monetary Economics, Elsevier, vol. 132(C), pages 118-139.
    12. Richard Disney & John Gathergood, 2018. "House Prices, Wealth Effects and Labour Supply," Economica, London School of Economics and Political Science, vol. 85(339), pages 449-478, July.
    13. Paula Garda & Volker Ziemann, 2014. "Economic Policies and Microeconomic Stability: A Literature Review and Some Empirics," OECD Economics Department Working Papers 1115, OECD Publishing.
    14. Jean‐Noël Barrot & Erik Loualiche & Matthew Plosser & Julien Sauvagnat, 2022. "Import Competition and Household Debt," Journal of Finance, American Finance Association, vol. 77(6), pages 3037-3091, December.
    15. Steven Laufer, 2018. "Equity Extraction and Mortgage Default," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 1-33, April.
    16. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    17. Adam M Guren & Alisdair McKay & Emi Nakamura & Jón Steinsson, 2021. "Housing Wealth Effects: The Long View," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(2), pages 669-707.
    18. Benetton, Matteo & Kudlyak, Marianna & ,, 2022. "Dynastic Home Equity," CEPR Discussion Papers 17464, C.E.P.R. Discussion Papers.
    19. Khandani, Amir E. & Lo, Andrew W. & Merton, Robert C., 2013. "Systemic risk and the refinancing ratchet effect," Journal of Financial Economics, Elsevier, vol. 108(1), pages 29-45.
    20. Jensen, Thais Laerkholm & Leth-Petersen, Søren & Nanda, Ramana, 2022. "Financing constraints, home equity and selection into entrepreneurship," Journal of Financial Economics, Elsevier, vol. 145(2), pages 318-337.

    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:sae:urbstu:v:50:y:2013:i:12:p:2588-2607. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: SAGE Publications (email available below). General contact details of provider: http://www.gla.ac.uk/departments/urbanstudiesjournal .

    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.