Arbeitspapier

The impact of the mortgage interest and capital deduction scheme on the Belgian mortgage market

In 2005, mortgage interest, capital deductions and insurance premiums (MICPD) were assembled into one single deduction package to further stimulate home ownership in Belgium. Former research has shown that the MICPD did not raise the probability of becoming a home owner, due to its capitalisation into higher house prices. The objective of this paper is to investigate how the transmission of the capitalisation takes place. The analysis is based on data extracted from the Household Finance and Consumption Survey. The mortgage amount, the mortgage maturity, the interest rate and the house price are estimated simultaneously using a 3-SLS approach. The results suggest that the mortgage deduction does not result in more affordable housing by shortening the mortgage maturity. Most likely, the mortgage deduction results in larger amounts being borrowed, which in turn may indirectly push up house prices, the mortgage maturity and the interest rate as well. Although our estimation sample is rather small, these results suggest that the MICPD might be more beneficial for sellers and mortgage-granting institutions than for home owners.

Language
Englisch

Bibliographic citation
Series: NBB Working Paper ; No. 327

Classification
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Fiscal Policies and Behavior of Economic Agents: Household
Subject
Mortgages
tax policy
house prices
mortgage interest deduction
household borrowing

Event
Geistige Schöpfung
(who)
Hoebeeck, Annelies
Inghelbrecht, Koen
Event
Veröffentlichung
(who)
National Bank of Belgium
(where)
Brussels
(when)
2017

Handle
Last update
10.03.2025, 11:41 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Hoebeeck, Annelies
  • Inghelbrecht, Koen
  • National Bank of Belgium

Time of origin

  • 2017

Other Objects (12)