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The Amortization Elasticity of Mortgage Demand

Research output: Working paper/Preprint Working paperResearch


  • wp20_16

    Final published version, 1.04 MB, PDF document

  • Claes Bäckman
  • ,
  • Peter van Santen, University of Groningen, Netherlands
We study how amortization payments affect household borrowing exploiting notches in the Swedish amortization requirement. We argue that amortization payments are costly for borrowers under a number of scenarios, and that they therefore affect credit demand. We provide causal evidence that a percentage point increase in amortization payments reduce LTV ratios by 2-3 percentage points, implying a sizable amortization elasticity of mortgage demand. Borrowers who seek to avoid making payments generally have higher debt, higher income and higher debt-to-income ratios. On the aggregate level, credit growth falls sharply after the introduction of the amortization requirement.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages52
Publication statusPublished - Nov 2020
SeriesEconomics Working Papers

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