Mortgage Indebtedness and Household Financial Distress

59 Pages Posted: 10 Mar 2010

See all articles by Dimitris Georgarakos

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Adriana Lojschova

European Central Bank (ECB)

Melanie E. Ward-Warmedinger

European Central Bank (ECB); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 13, 2010

Abstract

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

Georgarakos, Dimitris and Lojschova, Adriana and Ward-Warmedinger, Melanie E., Mortgage Indebtedness and Household Financial Distress (January 13, 2010). ECB Working Paper No. 1156. Available at SSRN: https://ssrn.com/abstract=1551227

Dimitris Georgarakos (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Adriana Lojschova

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Melanie E. Ward-Warmedinger

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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