Mortgages and Heterogeneity in the Transmission of Monetary Policy

We study the transmission of monetary policy to consumption and the accumulation of mortgage debt. Using a comprehensive and representative borrower-loan level panel the analysis focuses on how decisions to obtain new mortgages or refinance existing ones following policy driven changes in interest rates vary with individual characteristics, particularly age. Furthermore, we document whether this heterogeneity varies by type of refinancing and so look separately at refinancing with and without an increase in mortgage balance. We then explore how these differences in accessing mortgages interact with decisions to tap into housing net worth through home equity loans and lines of credit. Finally, we extended the analysis to other forms of borrowing such as credit card debt and car loans. The latter in turn informs the pass-through to a crucial component of durable consumption.