Mortgage Indebtedness and Household Financial Distress
59 Pages Posted: 10 Mar 2010
Date Written: January 13, 2010
Using comparable survey data from twelve European countries from 1994 to 2001 we investigate households’ attitudes towards mortgage indebtedness. We find that a given debt burden creates much higher distress in countries with fewer mortgage holders relative to countries where a significant part of households uses mortgage debt. This effect is net of ppp-adjusted income levels, various socioeconomic characteristics, housing traits, country-specific constant terms, and household unobserved heterogeneity. We show that households evaluate their own debt burden partly in comparison with the debt position of their peer group and in a way consistent with social stigma considerations which lessen in significance as markets expand.
Keywords: Mortgage debt, credit markets, financial distress, household finance, peer effects
JEL Classification: D12, D14, G21
Suggested Citation: Suggested Citation