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Paper eres2001_258:
Debt Usage and the Home Mortgage Interest Deduction

id eres2001_258
authors Pryce, Gwilym
year 2001
title Debt Usage and the Home Mortgage Interest Deduction
source 8th European Real Estate Society Conference (26-29 June 2001) Alicante, Spain
summary This paper examines the impact of mortgage interest tax deductions on the demand for mortgage debt in the UK. The tax advantage (since withdrawn in the UK) was introduced as a means of making home ownership more attractive to less wealthy borrowers who could only finance a small proportion of their house purchase with equity. As well as affecting tenure choice decisions, the structure of the mortgage interest relief system also affected mortgage debt decisions. This is because those in different tax brackets benefit differently from mortgage interest deductions, subject to two constraints. First, since 1974/75 interest deductions have been limited to that on a £25,000 mortgage (raised to $30,000 in 1983/84) and second, various ceilings have been introduced on the maximum tax rate at which interest on a loan can be deducted. The goal of this paper is to explain individual household loan to value ratios in a modelling framework that accounts for the incentives of the tax structure and the impact of borrowing constraints.
series ERES:conference
discussion No discussions. Post discussion ...
session Equilibrium in Mortgages Market
last changed 2009/07/10 18:07
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