Exploring the Rise of Mortgage Borrowing Among Older Americans
40 Pages Posted: 22 Mar 2018
Date Written: March 21, 2018
3.6 million more older American households have a mortgage than 2000, contributing to an increase in mortgage usage among the elderly of thirty-nine percent. Rather than collecting imputed rent, older households are borrowing against home equity, potentially with loan terms that exceed their expected life spans. This paper explores several possible explanations for the rise in mortgage borrowing among the elderly over the past 35 years and its consequences. A primary factor is an increase in homeownership rates, but tax policy, rent-to-price ratios, and increased housing consumption are also factors. We find little evidence that changes to household characteristics such as income, education, or bequest motives are driving increased mortgage borrowing trends. Rising mortgage borrowing provides older households with increased liquid saving, but it does not appear to be associated with decreases in non-housing consumption or increases in loan defaults.
Keywords: Household Economics, Consumer Debt, Personal Finance, Personal Savings, Retirement
JEL Classification: D12, D14, D15
Suggested Citation: Suggested Citation