Are Government and Bank Loans Substitutes or Complements? Evidence from Spatial Discontinuity in Equity Loans. (4th October 2018)

• Record Type: Journal Article
• Authors: Szumilo, Nikodem; Vanino, Enrico
• Is Part Of: Real estate economics. Volume 49:Number 3(2021)
• Page Start: 968
• Page End: 996
• Publication Date: 2018-10-04
• Subjects: Real estate business -- United States -- Periodicals; Urban economics -- Periodicals; 333.33097
• DOI: 10.1111/1540-6229.12261
• Languages: English
• ISSNs: 1080-8620

Abstract

Abstract: This article studies the impact of an increase in the limit of a direct equity loan provided by the U.K. government to finance mortgage deposits on aggregate mortgage lending by banks. It uses the spatial discontinuity methodology and takes advantage of the natural experiment which occurred when the limit of equity loans increased in London after the reform of the Help‐to‐Buy (HTB) scheme. By comparing postcode sectors on the opposite sides of the London boundary, we measure the impact of the new policy on very similar housing markets. The results show that higher equity loans increase aggregate mortgage lending by banks.