The Effects of Household Loan Default Rate on the Housing Market

This study analyzed the dynamic equilibrium relationship between the housing market and the housing mortgage delinquency rate on the ground of a possibility to reduce liability and amplify the substantial effect during the process of the interest rate increase. The error correction model (ECM) was used for an analysis. The effects of each factor were measured by employing a constraint formula. Moreover, a plan was proposed to achieve a stable equilibrium between the housing market and the housing mortgage loan. The estimated long-term equilibrium formula showed that a percentage increase of mortgage rate increased the delinquency by 0.14%, while a percentage increase of the actual mortgage size or the housing price decreased the delinquency rate by 3.51% or 1.63%, respectively. Moreover, the coefficient of the error correction term was estimated as -0.91. These analysis results indicate that the decrease of the housing price affects the increase of the delinquency rate more than the increase of the mortgage rate does. Moreover, the decrease of the housing price influences the household consumption and expenses more than the fluctuation of the interest rate does.