Preview

Voprosy Ekonomiki

Advanced search
Open Access Open Access  Restricted Access Subscription Access

Demand for housing loans and interest rates in Russian regions

https://doi.org/10.32609/0042-8736-2021-4-135-156

Abstract

This work examines the current world experience in assessing the sensitivity of household mortgage borrowing to interest rates. The data of the “bank— region—year” format are used to estimate supply and demand equations for housing loans issued by banks in the regions of the country in 2015—2018. Our estimations have revealed that the demand on the mortgage market in the regions is sensitive to the price of loans: when weighted average rate at which a bank issues mortgages in a region is lower by 1 percentage point it is associated with an increase in demand up to 20—25%, all other things being equal, that is, when taking into account the number of offices of a bank in that region, the economic situation and region’s characteristics in that year. Demand for mortgages is elastic at interest rates, which means that by lowering rates on mortgage programs, banks can expect an increase in demand, due both to an increase in overall demand for loans and to an overflow of borrowers from other banks. Consequently, it was confirmed that high interest rates on mortgages hinder the development of housing lending.

About the Author

A. V. Mishura
Novosibirsk State University ; Institute of Economics and Industrial Engineering of the Siberian Brunch of the Russian Academy of Sciences
Russian Federation

Novosibirsk



References

1. Bank of Russia (2018). Housing (mortgage) loan market in Russia, 2013—2017: Statistical Yearbook, No. 5. (In Russian).

2. Bank of Russia (2019a). Housing construction. Bank of Russia Analytical Notes, October. (In Russian).

3. Bank of Russia (2019b). Macroprudential measures aimed at sustainable development in the mortgage lending segment. Public Consultation Report, December. (In Russian).

4. Bank of Russia (2020). Housing construction. Bank of Russia Analytical Notes, October. (In Russian).

5. Kosareva N. B., Polidi T. D. (2019). Housing affordability in Russia and foreign countries. Voprosy Ekonomiki, No. 7, pp. 29—51. (In Russian). https://doi.org/10.32609/0042-8736-2019-7-29-51

6. Lozinskaya A. M., Ozhegov E. M. (2014). Estimation of mortgage lending credit risk. Applied Econometrics, Vol. 35, No. 3, pp. 3—17. (In Russian).

7. Mishura A. V., Bekareva S. V., Meltenisova E. N. (2020). Concentration in the banking sector and housing lending in Russian regions. Voprosy Ekonomiki, No. 4, pp. 107—128. (In Russian). https://doi.org/10.32609/0042-8736-2020-4-107-128

8. Nivorozhkina L. I., Ovcharova L. N., Sinyavskaya T. G. (2013). Econometric modeling of the risk of non-payment of consumer loans. Applied Econometrics, Vol. 30, No. 2, pp. 65—76. (In Russian).

9. Ozhegov E. M. (2017). Estimating the demand function for differentiated product with endogenous characteristics and heterogeneity of preferences: The case of mortgage loans. Applied Econometrics, Vol. 45, pp. 93—115. (In Russian).

10. Acolin A., Bricker J., Calem P., Wachter S. (2016). Borrowing constraints and homeownership. American Economic Review, Vol. 106, No. 5, pp. 625—629. https:// doi.org/10.1257/aer.p20161084

11. Bhutta N., Ringo D. (2019). The effect of interest rates on home buying: Evidence from a shock to mortgage insurance premiums. Available at SSRN: https://doi.org/ 10.2139/ssrn.3085008

12. Cumming F., Dettling L. (2019). Monetary policy and birth rates: The effect of mortgage rate pass-through on fertility. Bank of England Working Paper, No. 835. Available at SSRN: https://ssrn.com/abstract=3508649

13. DeFusco A., Paciorek A. (2017). The interest rate elasticity of mortgage demand: Evidence from bunching at the conforming loan limit. American Economic Journal: Economic Policy, Vol. 9, No. 1, pp. 210—240. https://doi.org/10.1257/pol.20140108

14. Di Maggio M., Kermani A., Keys B., Piskorski T., Ramcharan R., Seru A., Vincent Y. (2017). Interest rate pass-through: Mortgage rates, household consumption, and voluntary deleveraging. American Economic Review, Vol. 107, No. 11, pp. 3550—3588. https://doi.org/10.1257/aer.20141313

15. Dixit A., Stiglitz J. (1977). Monopolistic competition and optimum product diversity. American Economic Review, Vol. 67, pp. 297—308.

16. Fuster A., Zafar B. (2014). The sensitivity of housing demand to financing conditions: Evidence from a survey. FRB of New York Staff Report, No. 702, Federal Reserve Bank of New York. https://doi.org/10.2139/ssrn.2535912

17. Glaeser E., Gottlieb J., Gyourko J. (2013). Can cheap credit explain the housing boom? In: E. Glaeser, T. Sinai (ed.). Housing and the financial crisis. University of Chicago Press, pp. 301—359. https://doi.org/10.7208/chicago/9780226030616. 003.0008

18. Gruber J., Jensen A., Kleven H. (2017). Do people respond to the mortage interest deduction? Quasi-experimental evidence from Denmark. NBER Working Papers, No. w23600. https://doi.org/10.3386/w23600

19. Hacamo I. (2016). Helping the middle-class: How interest rates affect the distribution of housing wealth. Available at SSRN: https://doi.org/10.2139/ssrn.2687277

20. Khmelnitskaya M. (2014). Russian housing finance policy: State-led institutional evolution. Post-Communist Economies, Vol. 26, No. 2, pp. 149—175. https://doi.org/ 10.1080/14631377.2014.904104

21. Khmelnitskaya M. (2015). The policy-making process and social learning in Russia: Тhe case of housing policy. Palgrave Macmillan.

22. Martins N., Villanueva E. (2006). The impact of mortgage interest-rate subsidies on household borrowing. Journal of Public Economics, Vol. 90, No. 8—9, pp. 1601—1623. https://doi.org/10.1016/j.jpubeco.2005.09.007

23. Naoi M., Tiwari P., Moriizumi Y., Yukutake N., Hutchison N., Koblyakova A., Rao J. (2018). Household mortgage demand: А study of the UK, Australia and Japan. International Journal of Housing Markets and Analysis, Vol. 12, No. 1, pp. 110—130. https://doi.org/10.1108/IJHMA-03-2017-0029

24. Ozhegov E. (2017). Heterogeneous preferences of Russian residential mortgage borrowers. Journal of European Real Estate Research, Vol. 10, No. 1, pp. 35—56. https:// doi.org/10.1108/JERER-02-2016-0009


Supplementary files

Review

For citations:


Mishura A.V. Demand for housing loans and interest rates in Russian regions. Voprosy Ekonomiki. 2021;(4):135-156. (In Russ.) https://doi.org/10.32609/0042-8736-2021-4-135-156

Views: 1243


ISSN 0042-8736 (Print)