No Reason to Worry About German Mortgages? An Analysis of Macroeconomic and Individual Drivers of Credit Risk

This paper analyzes the macroeconomic and borrower-specific credit risk factors of residential real estate mortgages in Germany. Relying on a macroeconomic panel VAR model, we show a significant link between foreclosures, house price dynamics and unemployment. Using microeconomic regressions, we sho...

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Detalles Bibliográficos
Autores principales: Barasinska, Nataliya, Haenle, Philipp, Koban, Anne, Schmidt, Alexander
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer US 2023
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10246538/
http://dx.doi.org/10.1007/s10693-023-00409-3
Descripción
Sumario:This paper analyzes the macroeconomic and borrower-specific credit risk factors of residential real estate mortgages in Germany. Relying on a macroeconomic panel VAR model, we show a significant link between foreclosures, house price dynamics and unemployment. Using microeconomic regressions, we show that defaults are driven mostly by income and liquidity rather than loan-to-value (LTV) ratios. Based on those insights, we calibrate a structural model which predicts a significant increase in mortgage losses in a stress scenario, driven only partially by high-LTV loans. Hence, from a macroprudential perspective our findings support the need for a broad toolkit going beyond LTV-limits. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s10693-023-00409-3.

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