Mortgage Market Maturity and Homeownership Inequality Among Young Households: A Five-Country Perspective

54 Pages Posted: 27 Feb 2008 Last revised: 11 Jun 2008

See all articles by Alena Bicakova

Alena Bicakova

CERGE-EI, Prague

Eva Sierminska

LISER; DIW Berlin - German Socio-Economic Panel Study (SOEP); IZA Institute of Labor Economics

Date Written: February 1, 2008

Abstract

This paper uses the newly constructed Luxembourg Wealth Study data to document cross-country variation in homeownership rates and the homeownership-income inequality among young households in Finland, Germany, Italy, the UK and the US, and relate it to cross-country differences in mortgage market maturity. We find that aside from Italy, homeownership rates and inequality in the four countries correspond to their mortgage take up rates and its distribution across income, reflecting the different degree of development of their respective mortgage markets. In Italy, alternative ways of financing, such as family transfers, substitute the limited mortgage availability and explains the second highest homeownership rate in our sample, despite the lowest mortgage take up. The mortgage market in the UK is the most open and the most equal, which leads to the highest and most equally distributed homeownership in this country as well. The mortgage market in Germany is on the other side of the spectrum with very low mortgage take-up rates and strong dependence of homeownership and mortgage take up on household income. Finland and the US are in-between. Counterfactual predictions suggest that although household characteristics play some role in explaining the variation in home ownership rates across the five countries, it is mostly the country specific effects of these characteristics determined by the institutional environment as well as the functioning of the housing and mortgage markets that drive the main result.

Keywords: homeownership, credit constraints, mortgage market

JEL Classification: D14, D31, G21, R21

Suggested Citation

Bicakova, Alena and Sierminska, Eva, Mortgage Market Maturity and Homeownership Inequality Among Young Households: A Five-Country Perspective (February 1, 2008). SOEP Working Paper No. 90, DIW Berlin Discussion Paper No. 778, Available at SSRN: https://ssrn.com/abstract=1098855 or http://dx.doi.org/10.2139/ssrn.1098855

Alena Bicakova

CERGE-EI, Prague ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Eva Sierminska (Contact Author)

LISER ( email )

3, avenue de la Fonte
Esch-sur-Alzette, L-4364
Luxembourg

HOME PAGE: http://www.sierminska.eu

DIW Berlin - German Socio-Economic Panel Study (SOEP)

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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