NET WEALTH, MARGINAL TAX RATES AND THE DEMAND FOR HOME MORTGAGE DEBT

I explore the determinants of the demand for home mortgage borrowing to satisfy non-housing portfolio objectives. This component of the demand for mortgage debt is empirically identified from a model in which instruments for housing demand and net wealth are utilized. The estimation of mortgage demand is performed on Canadian household survey data. The Canadian tax rules on deductibility of mortgage interest enhance my ability to identify mortgage demand and measure the effect of household marginal tax rates. Controlling for tax rates, wealth and household sociodemographic attributes, I am able to estimate the effect of asset choices on mortgage demand.