Research On Household Behavior Of Mortgage Choice And Housing Consumption

Since the development of household mortgage operation in China, householdmortgage amount was increasing year by year. But compared with the developedcountries, China’s mortgage market is still in a fledging period, which the number ofhouseholds adapting mortgage to purchase their houses is small and the type ofmortgage instrument is limited to variable rate mortgage with equal installment payment.The current situation of China’s mortgage market restricts the sustainable developmentof China’s housing market, and restricts the residential housing affordability as well.Based on this background, this paper analyzes the household behavior on mortgagechoice and the effect of mortgage on housing consumption theoretically andempirically.This research analyzes the effect of mortgage on housing consumption choice, andestablishes an empirical model of homeownership to analyze the relationship betweencredit constraint and homeownership based on the―Survey of Chinese ConsumerFinance and Investor Education’’(SCCFIE) in2008‖. Then the mortgage demand of thehome owners is analyzed. At last, uncertainty regard to income and housing prices aretaken into account in the model of households’ mortgage demand, in order to revealthe major factors affecting households’ mortgage demand and the characteristics ofhouseholds’’ mortgage behavior.The analysis of this thesis finds that: Wealth induced credit constraint hassignificant negative effect on homeownership in China, but not income induced creditconstraint. In addition, housing consumption and income are the key factors influencinghousehold mortgage decision and mortgage amount. Transfer income and debt incomeare also found to inhibit mortgage demand because families tend to access other sourcesfor housing consumption, resulting in a reduction in demand for mortgage. However,mortgage rate and saving rate don’t have significant effect on household mortgagechoice, as well as macro-economic factors. Under uncertain variables measured byincome uncertainty and housing price uncertainty, household mortgage choice tends topresent some differences. Income uncertainty doesn’t have significant effect onmortgage choice, but housing price uncertainty prohibits the choice of mortgagesignificantly. The study of the thesis highlight the importance of housing credit policy on household consumption and also provide an factual basis for the reform of China’shousing finance system.