Discussion paper
DP16144 Help to Spend? The Housing Market and Consumption Response to Relaxing the Down Payment Constraint
We show that relaxing the down payment constraint positively affects household
consumption in addition to stimulating housing market activity. For identification,
we use the UK Help-to-Buy (HTB) program as a quasi-natural experiment and
exploit geographic variation in exposure to the program. We document a significant
increase in home purchases, largely driven by first-time and young buyers. More
exposed regions also experience a rise in home-related expenditures, non-durable
consumption and loan-financed car purchases. Local demand effects appear to partly
drive the consumption response. Our findings thus show that interventions in the
mortgage market can have important local macroeconomic spillover effects.
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