Determinants of Mortgage Debt Growth in EU Countries

Abstract

Abstract This paper presents an analysis of mortgage debt growth in the EU-15 countries. Mortgage debt has risen quickly in many countries in recent years, reaching historically very high levels that increasingly attract the attention from both researchers and policymakers. While there are some papers on factors behind national mortgage debt developments, studies taking a broader approach, both regarding the number of countries included and the potential determinants of mortgage debt growth, are still lacking. This study aims at filling this gap and presents estimates for real mortgage debt growth for the EU-15 countries, using pooled regressions for the period 1982–2003. Special attention is paid to properly defining mortgage costs, for which an after-tax measure is constructed. The regressions indicate that real mortgage debt is affected by after-tax mortgage interest costs, by house prices, financial deregulation, and stock markets, while the effects of household disposable income and inflation are les...