Exploring the Rise of Mortgage Borrowing Among Older Americans

40 Pages Posted: 22 Mar 2018  

J. Michael Collins

University of Wisconsin - Madison

Erik Hembre

University of Illinois at Chicago - Department of Economics

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 21, 2018

Abstract

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

Collins, J. Michael and Hembre, Erik and Urban, Carly, Exploring the Rise of Mortgage Borrowing Among Older Americans (March 21, 2018). Available at SSRN: https://ssrn.com/abstract=3146187 or http://dx.doi.org/10.2139/ssrn.3146187

J. Michael Collins

University of Wisconsin - Madison ( email )

United States
6086160369 (Phone)

Erik Hembre (Contact Author)

University of Illinois at Chicago - Department of Economics ( email )

725 University Hall (UH)
Chicago, IL 60607-7121
United States

HOME PAGE: http://www.ssc.wisc.edu/~hembre/

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics ( email )

Bozeman, MT 59717-2920
United States
4069942005 (Phone)

HOME PAGE: http://www.montana.edu/urban

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