The 2007 financial crisis and the UK residential housing market: did the relationship between interest rates and house prices change?

Tse, Chin-Bun, Rodgers, Timothy and Niklewski, Jacek (2014) The 2007 financial crisis and the UK residential housing market: did the relationship between interest rates and house prices change? Economic Modelling, 37. pp. 518-530. ISSN 0264-9993

[img]
Preview
PDF
HOUSE PRICES (25 June 2013) with figures as pictures.pdf - Accepted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (1MB) | Preview

Abstract

This paper investigates the impact of the 2007 financial crisis on the relationship between real mortgage interest rates and real house prices. It applies a dynamic conditional correlation based methodology that uses fractionally differenced data along with controls for structural breaks and non-interest-rate related factors that influence house prices. The key finding made is that the financial crisis had a long-term structural impact on the monetary transmission relationship. For example, we find that the mean conditional correlation between house prices in England and Wales and the three-year fixed mortgage rate rose by 6.6 percentage points. Similarly, the mean correlation between prices and the standard variable mortgage rate increased 6.4 percentage points to 54%. These findings suggest to us that interest-rate-based monetary policy still has an important role to play in the housing market.

Item Type: Article
Additional Information: © 2014 Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords: Financial crisis; Residential housing market; Conditional correlation; Transmission mechanism
Subjects: Social sciences > Economics and economic history
Business and finance
Depositing User: Chin-Bun Tse
Date Deposited: 14 Feb 2016 02:30
Last Modified: 06 Apr 2017 12:55
URI: http://repository.uwl.ac.uk/id/eprint/1597

Downloads

Downloads per month over past year

Actions (login required)

View Item View Item

Menu