PUBLICATIONS
2024, Journal of Finance
[Version with Online Appendix] [Link to JF Webinar]
Abstract
We study the impact of rising mortgage rates on mobility and labor reallocation. Using individual-level credit record data and variation in the timing of mortgage origination, we show that a 1 p.p. decline in the difference between mortgage rates locked in at origination and current rates reduces moving by 9% overall and 16% between 2022-2024, and this relationship is asymmetric. Mortgage lock-in also dampens flows in and out of self-employment and the responsiveness to shocks to nearby employment opportunities that require moving, measured as wage growth within a 50 to 150-mile ring and instrumented with a shift-share instrument.
- Brattle Group Prize: First Prize Paper (2025)
- Marshall Blume Prize (2024), Holden Conference Best Paper Award (2023)
- Covered by the Wall Street Journal, Bloomberg, NPR, New York Times, MarketWatch, ABC News and other outlets
Refinancing Cross-Subsidies in the Mortgage Market (with Jack Fisher, Alessandro Gavazza, Tarun Ramadorai and Jagdish Tripathy), 2024, Journal of Financial Economics
[Online Appendix]
Abstract
In household finance markets, inactive households can implicitly cross-subsidize active households who promptly respond to financial incentives. We assess the magnitude and distribution of cross-subsidies in the mortgage market. To do so, we build a structural model of household mortgage refinancing and estimate it on rich administrative data covering the stock of outstanding mortgages in the UK. We estimate sizeable cross-subsidies that flow from relatively poorer households and those located in less-wealthy areas towards richer households and those located in wealthier areas. Our work highlights how the design of household finance markets can contribute to wealth inequality.
- Jensen Prize: First Prize Paper (2024)
Reference Dependence in the Housing Market (with Steffen Andersen, Cristian Badarinza, Julie Marx and Tarun Ramadorai), 2022, American Economic Review
[Publisher's Version] [Online Appendix]
Abstract
We quantify reference dependence and loss aversion in the housing market using rich Danish administrative data. Our structural model includes loss aversion, reference dependence, financial constraints, and a sale decision, and matches key nonparametric moments, including a "hockey stick" in listing prices with nominal gains, and bunching at zero realized nominal gains. Households derive substantial utility from gains over the original house purchase price; losses affect households roughly 2.5 times more than gains. The model helps explain the positive correlation between aggregate house prices and turnover, but cannot explain visible attenuation in reference dependence when households are more financially constrained.
WORKING PAPERS
Conditionally Accepted, Review of Financial Studies
[NBER Working Paper]
Abstract
Mortgage borrowers are "locked in": forgoing moves to hold on to low rates. Lock-in reduces both housing supply, through households who do not sell, and demand, through households who do not buy elsewhere, evidenced by a 40% drop in U.S. existing home sales between 2022 and 2024. We show that mortgage lock-in raises net housing demand: missing downsizers stay in larger homes, particularly in expensive areas, demanding more housing and offsetting a third of the aggregate house price decline caused by higher rates. Using individual-level mortgage data, we provide causal evidence that lock-in disproportionately reduces moves down the housing ladder. We design a spatial housing ladder model with long-term mortgages, which generates a distribution of locked-in rates and a causal effect on mobility consistent with the data, and use it to study the equilibrium effects of lock-in. A temporary rate hike causes lock-in, increasing aggregate house prices by 4.4% and rents by 1.5% relative to a counterfactual without lock-in, while mortgage borrowers' mobility falls by 25%. A $10k tax credit to starter-home sellers modestly increases mobility but raises trade-up home prices. We estimate a cost of $650k per marginal move, indicating that demand-based housing policies are poorly targeted responses to lock-in in our model.
- Marshall Blume Prize (2026, Honorable Mention), WashU Annual Finance Conference Best Paper Award (2024)
- Presented at (selected): CEPR Household Finance Virtual Seminar Series, Wharton Urban/Real Estate, Biannual Workshop Macro Finance Society*, FRBSF/Ziman Conference on Real Estate, Financial Markets and Monetary Policy, CEPR Household Finance*, FRBSF Advances in Macro-Finance Research Conference, Bank of Canada Housing Workshop, WashU Annual Finance Conference*, Columbia-NYU-Yale Housing Day*, SFS Cavalcade*, WFA, NBER SI Real Estate*, SITE Financial Regulation*, NBER Economic Fluctuations and Growth Fall Meeting, NBER Household Finance Fall Meeting (Innovative Data in Household Finance).
- Covered by NPR Planet Money
Abstract
Adjustable-rate mortgages (ARMs) expose households to rising payments and defaults, while fixed-rate mortgages (FRMs) expose lenders to more interest rate risk. We evaluate these forces in a quantitative model with flexible mortgage contracts, liquidity-driven household default, and a banking sector with sticky deposits. Financial stability risks are U-shaped in fixation length, trading off FRM benefits from deposit rate stickiness against a novel bank net worth hedging channel: ARMs concentrate defaults in high-net-worth states when mortgage payments rise more than funding costs. Intermediate-fixation contracts of 4 to 6 years balance these effects, minimizing financial sector volatility and improving aggregate risk sharing.
- Presented at (selected): AREUEA National Conference*, Stanford Macro-Finance Junior Workshop, Columbia Workshop in New Empirical Finance*, SFS Cavalcade, ECB Conference on Financial Stability and Macroprudential Policy, WFA*, NBER SI Macro, Money, and Financial Frictions*, CEPR ESSFM Gerzensee (Asset Pricing), EFA*, WashU-St.Louis Fed Macro Finance Conference*, Holden Conference, Princeton Macro Finance Conference, Wharton Liquidity Conference, Bank of Canada Housing Workshop*, Adam Smith Workshop*.
Revise & Resubmit, Review of Economic Studies
Abstract
Long-term fixed-rate mortgage contracts protect households against interest rate risk, yet most countries have relatively short interest rate fixation lengths. Using administrative data from the UK, the paper finds that the choice of fixation length tracks the life-cycle decline of credit risk in the mortgage market: the loan-to-value (LTV) ratio decreases and collateral coverage improves over the life of the loan due to principal repayment and house price appreciation. High-LTV borrowers, who pay large initial credit spreads, trade off their insurance motive against reducing credit spreads over time using shorter-term contracts. To quantify demand for long-term contracts, I develop a life-cycle model of optimal mortgage fixation choice. With baseline house price growth and interest rate risk, households prefer shorter-term contracts at high LTV levels, and longer-term contracts once LTV is sufficiently low, in line with the data. The mechanism helps explain reduced and heterogeneous demand for long-term mortgage contracts.
- AREUEA Homer Hoyt Dissertation Award (2024)
- Arthur Warga Award for Best Paper in Fixed Income at SFS Cavalcade North America (2023)
- CEPR Household Finance Best Student Paper Award (2021)
- ESRB Ieke van den Burg Prize for Research on Systemic Risk (2022, Runner-Up)
- Knowledge@Wharton: "Why Long-Term Home Mortgages Have Costly Trade-Offs" | Bank of England Twitter Summary
- Presented at (selected): Bank of England, CEPR European Workshop on Household Finance, The Mortgage Market Research Conference (Federal Reserve Bank of Philadelphia), Texas Finance Festival, Chicago Booth Household Finance Conference, UCLA/FRBSF Conference on Housing, Financial Markets, and Monetary Policy, SFS Cavalcade, WFA.
Abstract
This paper studies supply-side product pricing when consumers underreact to non-salient fees. Using comprehensive data on issued and offered mortgages in the UK, I document that lenders differ substantially in the fees they charge, and that borrowers appear less overall cost-sensitive to products with fees. In order to distinguish from demand factors such as unobservable preferences or product characteristics, I show that lenders pass on firm-specific funding cost shocks via fees, but not interest rates, consistent with strategic pricing of fees, and maintaining competitive prices in the salient price dimension, interest rates. I further find heterogeneity in pricing across lenders: those who rely on high fees tend to have higher funding cost, lower return on equity and larger branch networks, in line with a specialization equilibrium in which high-cost lenders are able to match with less cost-sensitive consumers. (Previously circulated as "Product Proliferation as Price Obfuscation? Evidence from the Mortgage Market")
- Michael J. Barclay Young Scholar Award (FRA 2018)
- Bank of England Staff Working Paper, Central Banking Article
- Presented at (selected): Imperial College, Bank of England, FCA Research Seminar, CEPR European Workshop in Household Finance, Showcasing Women in Finance Conference (SHoF), Annual Meeting of the Financial Research Association (FRA).
