The impact of the mortgage interest and capital deduction on Belgian borrowing behavior.
||Hoebeeck, Annelies; Carine Smolders
||The impact of the mortgage interest and capital deduction on Belgian borrowing behavior.
||22nd Annual European Real Estate Society Conference in Istanbul, Turkey
||In 2005, a system of mortgage interest, insurance premiums and capital deduction (MICPD) was introduced in Belgium to replace and simplify the previous system of fiscal housing benefits. Mortgage interest, capital amortizations and insurance premiums were assembled into one single deduction package. Although previous research has shown that the MICPD did not promote home ownership, we show in this paper that the MICPD did affect the mortgage market. The Household Finance and Consumption Survey is used to investigate the impact of the MICPD on the borrowing behavior of the Belgian households. A probit analysis is used to model the probability of holding mortgage debt. Mortgage demand, mortgage terms and housing consumption are estimated simultaneously in a 3-SLS approach. The results indicate that the fiscal benefit of the MICPD has induced households to modify their mortgage amounts and terms to maximize the fiscal advantage of the MICPD, rather than inducing them to take out a mortgage. Furthermore, we find that couples and financially unconstrained households are most likely to adapt their borrowing preferences.
||Mortgage demand , Mortgage term, Interest deduction, Housing consumption
||file.ppt (2,606,178 bytes)
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||Housing Markets & Economics
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