Housing, Mortgages, and Self Control

42 Pages Posted: 1 Nov 2016

See all articles by Kathrin Schlafmann

Kathrin Schlafmann

Copenhagen Business School - Department of Finance; Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR)

Date Written: October 2016

Abstract

Using a quantitative theoretical framework this paper analyzes how problems of self control influence housing and mortgage decisions. The results show that people with stronger problems of self control are less likely to become home owners, even though houses serve as commitment for saving. The paper then investigates the welfare effects of regulating mortgage products if people differ in their degree of self control. Higher down payment requirements and restrictions on prepayment turn out to be beneficial to people with sufficiently strong problems of self control, even though these policies further restrict access to the commitment device.

Keywords: Commitment Device, Housing, Mortgages, Self Control, Temptation

JEL Classification: D91, E21

Suggested Citation

Schlafmann, Kathrin, Housing, Mortgages, and Self Control (October 2016). CEPR Discussion Paper No. DP11589, Available at SSRN: https://ssrn.com/abstract=2862206

Kathrin Schlafmann (Contact Author)

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3
Frederiksberg, 2000
Denmark

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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