Nils Landén Mammos: Parents’ wealth matters significantly for first-time homebuyers

Using detailed Swedish register data, Nils Landén Mammos shows that assistance with the down payment not only changes which homes young buyers choose – it also affects the impact of mortgage regulations and which households are most affected by them.

What made you start investigating these particular questions?

“I became interested in how the housing market interacts with the macroeconomy while working with forecasts for the Swedish economy at the Ministry of Finance. At the same time, I was drawn to questions about the effects of policy changes such as the amortization requirements, which had recently been introduced. Later, together with my supervisor Roine Vestman, I was given access to new datasets that enabled me to examine these questions in greater detail in my dissertation.”

Which findings in your dissertation do you consider most important?

“One key finding is that parents’ wealth matters for how first-time homebuyers are affected by different mortgage regulations, such as loan-to-value (LTV) caps and amortization requirements. The results show that first-time buyers who received help from their parents with the down payment were less affected by the mortgage cap introduced in 2010, which may not be surprising.
A more unexpected result – at least it was unexpected to me – is that the amortization requirements introduced a few years later affected these first-time buyers more. This is because those who receive more financial assistance for the down payment tend to take on larger mortgages relative to their income in order to purchase more expensive homes. As a result, measures such as amortization requirements have a greater impact on these households.”

What practical significance could your findings have – for policymakers, or the public?

“Hopefully, the findings can contribute to discussions about how housing-market policies should be designed, both to achieve their intended objectives and to limit unintended negative side effects. For example, is it reasonable to introduce broad relaxations of mortgage caps and amortization requirements to make it easier to buy a first home, or should such measures be more targeted, given that their effects can differ substantially across household types? In the longer term, this is an important question to consider if such policies are not to be perceived as unfair.”