Riding the Housing Wave: Home Equity Withdrawal and Consumer Debt Composition

Research Question

This paper investigates how rising house prices affect the composition of household debt portfolios in Sweden during 2010–2014. Specifically, the authors ask whether homeowners who experience housing wealth gains use home equity withdrawals to substitute relatively expensive unsecured consumer (non-mortgage) debt with cheaper collateralized mortgage debt — a form of debt re-optimization — and what individual and policy factors drive this behavior.

Data and Methodology

The study uses a monthly individual-level panel dataset sourced from Upplysningscentralen (UC), the Swedish credit bureau, covering approximately 4.8 million individuals (62 percent of the Swedish adult population) from July 2010 to July 2014. The UC data captures approximately 80 percent of total household credit volume and 97 percent of household mortgage loans. Parish-level house price indices come from Valueguard, and municipality-level education data come from Statistics Sweden. The empirical analysis draws on a random sample of approximately 150,000 individuals, of whom 81,667 (81 percent) are classified as homeowners — defined as individuals holding a mortgage throughout the entire sample period.

Xin Zhang | Macro Paper Warehouse

Riding the Housing Wave: Home Equity Withdrawal and Consumer Debt Composition