This is known as the wealth channel, which appears important in the Australian context. The balance sheet channel is closely related. Rising net worth makes it easier to borrow, with higher collateral values making lending a less risky proposition. The cash-flow channel appears to be an important part of the transmission mechanism in Australia. Changes in interest rates affect households’ and businesses’ cash flows.
Many renters are happy with their current home, but are required to move because the lease expired or the landlord sold the property. If we are concerned about inequality of housing outcomes, perhaps we should focus less on the type of tenure, and more on security of tenure. That’s just a brief round-up of some of the issues we have been looking at recently.