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Advisor(s)
Abstract(s)
This paper studies the determinants and behavior of outstanding mortgage loan
to value (LTV) ratios for a panel data set of 5,179 households over the period
1992-2005. We find that outstanding LTVs are driven by household characteristics,
life-cycle effects and mortgage type characteristics. LTV declines with
the time elapsed since mortgage commencement, but its level is consistently
higher (by around 10%) for non-repayment mortgages (such as interest-only or
endowment mortgages) than for repayment mortgages (such as linear or annuity
mortgages). The difference results from higher debt capacity associated with the
possibility of deferring the principal repayment for non-repayment mortgages.
Our results indicate that the recent proliferation of non-repayment mortgages
is driven by tightening financing constraints due to declining affordability in
the housing market and that the overall quality of outstanding mortgages has
substantially deteriorated over the last decade.
Description
Keywords
Housing finance Mortgages Leverage choice
Citation
CUNHA, Ricardo; LAMBRECHT, BART M.; PAWLINA, GRZEGORZ - Determinants of outstanding mortgage loan to value ratios: evidence from the netherlands. In EFA 2009 - European Finance Association, 36º Meeting, Bergen, Norway, 17 December, 2009 - EFA 2009 Bergen Meeting Papers. 61p. Available at SSRN: http://ssrn.com/abstract=1107822