In the past three decades, house prices and mortgage debt in the UK have risen much faster than income. In other words, people end up borrowing more money when house prices go up. This finding goes against many canonical economic models in which, when house prices go up, home buyers are forced to buy proportionately smaller houses to keep the amount of borrowing and housing expenditure constant. What happens instead is that people aim to keep their type and size of housing constant, therefore adjusting upwards the amount they borrow.

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2 October 2024

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LSE Politics and Policy

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https://blogs.lse.ac.uk/politicsandpolicy/why-higher-house-prices-lead-to-higher-borrowing/

This Blog is published under the centre's Urban programme, Neighbourhoods programme.

This publication comes under the following theme: Housing