Without implicating, we thank numerous seminar participants, and especially Luc Laeven, Ralf Meisenzahl, and Skander Vandenheuvel for helpful comments, and Eric Hardy for excellent research assistance. The views expressed in this paper do not necessarily reflect those of the Federal Reserve System.
The Impact of House Prices on Consumer Credit: Evidence from an Internet Bank
Article first published online: 15 AUG 2013
© 2013 The Ohio State University
Journal of Money, Credit and Banking
Volume 45, Issue 6, pages 1085–1115, September 2013
How to Cite
RAMCHARAN, R. and CROWE, C. (2013), The Impact of House Prices on Consumer Credit: Evidence from an Internet Bank. Journal of Money, Credit and Banking, 45: 1085–1115. doi: 10.1111/jmcb.12045
- Issue published online: 15 AUG 2013
- Article first published online: 15 AUG 2013
- Manuscript Accepted: 23 JUL 2012
- Manuscript Received: 29 APR 2010
- consumer credit;
- house prices
This paper shows that house price fluctuations can have a significant impact on credit availability. Data from Prosper.com, a peer-to-peer lending site that matches borrowers and lenders to provide unsecured consumer loans, indicate that homeowners in states with declining house prices experience higher interest rates, greater credit rationing, and faster delinquency. We find especially large effects for subprime borrowers whose balance sheets are likely most exposed to asset price declines. This evidence suggests that asset price fluctuations can play an important role in determining credit conditions and are thus a potentially significant mechanism for propagating macroeconomic shocks.