Consumption Effects of Mortgage Payment Holidays: Evidence During the Covid-19 Pandemic

57 Pages Posted: 16 Mar 2022

See all articles by Bruno Albuquerque

Bruno Albuquerque

International Monetary Fund (IMF)

Alexandra Varadi

Bank of England

Multiple version iconThere are 2 versions of this paper

Date Written: February 25, 2022

Abstract

We use UK transaction-level data during the Covid-19 pandemic to study whether mortgage payment holidays (PH) can act as a mechanism for smoothing household consumption following negative aggregate shocks. Our results suggest that mortgage PH were accessed by both households with pre-existing financial vulnerabilities and by those with stronger balance sheets, including buy-to-let investors. We also find that the temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those non-eligible for the policy. Finally, we find that mortgage PH led to higher saving rates for more financially-stable households.

Keywords: Mortgage payment holidays, household behaviour, consumption, high-frequency data, difference-in-differences, panel data

JEL Classification: D14, E21, G51

Suggested Citation

Albuquerque, Bruno and Varadi, Alexandra, Consumption Effects of Mortgage Payment Holidays: Evidence During the Covid-19 Pandemic (February 25, 2022). Bank of England Working Paper No. 963, Available at SSRN: https://ssrn.com/abstract=4057549 or http://dx.doi.org/10.2139/ssrn.4057549

Bruno Albuquerque

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/view/brunoalbuquerque19

Alexandra Varadi (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
27
Abstract Views
253
PlumX Metrics