House Price Shocks and Household Indebtedness in the United Kingdom

25 Pages Posted: 7 Jun 2010

See all articles by Richard F. Disney

Richard F. Disney

University of Nottingham; Institute for Fiscal Studies (IFS); Axia Economics

Sarah Bridges

University of Nottingham

John Gathergood

University of Nottingham - School of Economics

Abstract

We use household panel data to explore the link between changes in house prices and household indebtedness (both secured on housing assets and unsecured) in the United Kingdom. We show that households which are borrowing-constrained by a lack of housing equity as collateral make greater use of unsecured debt such as credit cards or personal loans. In response to rising house prices, which relax this constraint, such households are more likely to refinance and to increase their indebtedness relative to unconstrained households. However, for most households, house price movements appear to have little impact on indebtedness.

Suggested Citation

Disney, Richard F. and Bridges, Sarah and Gathergood, John, House Price Shocks and Household Indebtedness in the United Kingdom. Economica, Vol. 77, Issue 307, pp. 472-496, July 2010, Available at SSRN: https://ssrn.com/abstract=1620643 or http://dx.doi.org/10.1111/j.1468-0335.2008.00773.x

Richard F. Disney (Contact Author)

University of Nottingham ( email )

School of Economics
Nottingham NG7 2RD
United Kingdom
+44 115 951 5620 (Phone)
+44 115 951 4159 (Fax)

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
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Axia Economics ( email )

38 Concanon Road
London SW2 5TA
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Sarah Bridges

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

John Gathergood

University of Nottingham - School of Economics ( email )

Sir Clive Granger Building
University Park
Nottingham, NG7 2RD
United Kingdom

HOME PAGE: http://https://sites.google.com/site/gathergoodjohn/

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