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Monetary Policy and Home Buying Inequality

Daniel Ringo

Federal Reserve Board

Does monetary policy influence who becomes a homeowner? Lower-income home buyers may be more sensitive to interest rates, at least in part because they more frequently come up against binding payment-to-income ratio constraints in credit decisions. Exploiting the timing of high-frequency observations of individual mortgage rate locks around monetary policy shocks, I find that a 1 percentage point policy-induced increase in mortgage rates lowers the presence of lower-income households in the population of home buyers by 1 to 2 percentage points immediately following the shock. Effects are substantially stronger among first-time home buyers and persist for approximately one year.

DOI

10.1162/rest_a_01445

Pages

1-15

Language

en

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