Discussion paper
DP11589 Housing, Mortgages, and Self Control
Using a quantitative theoretical framework this paper analyzes how problems of self control influence housing and mortgage decisions. The results show that people with stronger problems of self control are less likely to become home owners, even though houses serve as commitment for saving. The paper then investigates the welfare effects of regulating mortgage products if people differ in their degree of self control. Higher down payment requirements and restrictions on prepayment turn out to be beneficial to people with sufficiently strong problems of self control, even though these policies further restrict access to the commitment device.
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