Research

I study how monetary policy interacts with mortgage underwriting standards in shaping tenure decisions and rental market equilibria. Using property-level data from the American Housing Survey, I show that the increase in mortgage rates between 2021 and 2023 pushed many potential first-time home-buyers above FHA mortgage payment-to-income limits, restricting their access to home-ownership. This resulted in additional demand pressure on local rental markets, contributing to rent price inflation in 2023. Rentals located in cities with larger shares of constrained first-time buyers experienced steeper price growth, controlling for unit characteristics and contemporaneous economic developments. Rent inflation was more pronounced in smaller units occupied by lower-income renters, underscoring the potential for second-round distributional effects of monetary policy.

Upcoming presentations: 2026 AEA meetings, Philadelphia                              

  IMF WP version

We study the two-way relationship between fixed-rate mortgages (FRMs) and monetary policy in a panel of up to 35 countries observed over the last two decades. The dataset includes quarterly information on the composition of mortgage flows and stocks by type of rate-fixation and monetary policy shocks cleaned of information effects. Using instrumental-variable local projections, we show that FRMs induce both path- and state-dependency in monetary transmission. Changes in policy rates shape mortgage choice, increasing (decreasing) the share of FRMs during easing (tightening) cycles. Over time, this mechanism alters the composition of the outstanding mortgage stock which, in turn, affects the central bank’s ability to stabilize the economy ex-post. A greater (lower) prevalence of FRMs weakens (strengthens) monetary policy transmission to real private consumption and GDP.

Data on ARM flows and Stocks

Presented at: Bank of Finland-CEPR Conference, Frontiers in Monetary Economics in the 21st Century

 IMF WP version