研究 The Consumer 支出 Response to Mortgage Resets

The slow recovery that followed the Great Recession raised questions about the impact of monetary policy at a microeconomic level. 值得注意的是, this included the question of how changes in the federal funds target rate impact personal spending for individual households. It’s something that is especially important to understand as we’ve emerged from the economic downturn and are now in an economic environment that includes rates on the rise.

In an effort to address this question, today we released a new report, The Consumer 支出 Response to Mortgage Resets: Microdata on Monetary Policy, in which we analyze the consumer response to a predictable drop in their mortgage payment between 2010 and 2012 that was driven by the Federal Reserve’s low interest rate policy.

We find that homeowners experienced significant increases in disposable income and responded with robust anticipatory and contemporaneous increases in consumption.

Following are the key findings from today’s report, or you can view the 完整的报告 or 新闻稿.

• 找到一个: Forty-four percent of the homeowners in the sample experienced a large drop in their hybrid ARM payment at reset, which on average represented over 5 percent of their monthly income.
• 发现二: Homeowners increased their spending by 9 percent in advance of the anticipated drop in their mortgage payments and by 15 percent after reset, despite a considerable drop in housing wealth.
• 发现三: Homeowners used credit card borrowing to finance 21 percent of their pre-reset anticipatory spending increase, and post–reset they further increased their revolving balances. Over the full two year period, their total spending increase exceeded their mortgage-related savings by 4 percent.
• 发现四: Homeowners used the savings from lower hybrid ARM payments to make more purchases across all spending categories, notably home improvement and healthcare.

These data underscore the impact of accommodative monetary policy on the spending of ARM borrowers despite declining home values, and highlight a segment of borrowers that should be carefully watched as rates begin to go back up. As housing policy reforms are deliberated, consideration should also be given to how those policies impact which type of mortgage borrowers choose and the influence those choices have on the ability of monetary policy to impact personal consumption.

We note that this report builds on a recent academic paper written independently by 12bet官方 研究所 Fellow Vijay Narasiman, What do Adjustable-rate Mortgage Resets Say about Household Consumption Behavior and the Income Channel of Monetary Policy? The 研究所’s research fellows play a valuable role in the work that we do both in supporting our existing research agenda and contributing fresh insights on the data we analyze.

The goal of the 12bet官方 研究所 is to help decision-makers use better facts, 及时的数据, and thoughtful analysis to make smart decisions to advance global prosperity.