This study specifies and estimates qualitative dependent variable and truncated variable models of mortgage demand using Family Expenditure Survey Data for 1986. The focus of the research is the better understanding of mortgage choices under conditions of rationing and subsequent to the financial deregulation of mortgage markets. Mortgage choices involve the decision to incur mortgage debt, the size of that debt and the choice of mortgage instrument. The links between these various mortgage choices, through the user cost of owner occupation, are also explored. The econometric methodology allows for the presence of rationing in the estimation of the discrete choice of entering owner occupation with mortgage debt and choosing its size. A double hurdle model of mortgage demand is specified and tested and compared with a Tobit where zero observations are assumed to reflect equilibrium rather than rationed decisions. The modelling is extended by estimating a model of the choice of mortgage instrument. This is done with a bivariate probit with sample selection. The empirical specifications are motivated by life cycle theory. The results indicate that rationing had an influence upon the discrete and continuous dimensions of mortgage choice. The double hurdle model appears a more appropriate specification than the Tobit. The choice of mortgage instrument also appears to be influenced by the presence of liquidity constraints and a concern for cash flow.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:260305 |
| Date | January 1995 |
| Creators | Leece, David |
| Publisher | Keele University |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
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