Claes Bäckman
@claesbackman.bsky.social
Economist working on interest-only mortgages, housing, homeownership, social networks, and stock market participation. The goal is to combine all topics into one paper, but so far they are separate. https://sites.google.com/view/claesbackman/home
That was a much better answer than mine!
November 18, 2025 at 7:50 PM
That was a much better answer than mine!
That’s a good question, I asked that of @alemartinello.com too. I wouldn’t expect much impact on house prices in Denmark from 40-year mortgages, because IO mortgages are available.
November 18, 2025 at 5:01 PM
That’s a good question, I asked that of @alemartinello.com too. I wouldn’t expect much impact on house prices in Denmark from 40-year mortgages, because IO mortgages are available.
@alemartinello.com also wrote well about this question!
November 18, 2025 at 2:34 PM
@alemartinello.com also wrote well about this question!
But, longer maturities will likely not benefit first-time buyers
-- If the benefit of longer maturities is capitalized into house prices, first-time buyers will not have increased access to the housing market
-- If the benefit of longer maturities is capitalized into house prices, first-time buyers will not have increased access to the housing market
November 18, 2025 at 2:34 PM
But, longer maturities will likely not benefit first-time buyers
-- If the benefit of longer maturities is capitalized into house prices, first-time buyers will not have increased access to the housing market
-- If the benefit of longer maturities is capitalized into house prices, first-time buyers will not have increased access to the housing market
The concern with longer maturities is that borrowers may not make informed decisions and may be enticed by lower monthly payments.
November 18, 2025 at 2:34 PM
The concern with longer maturities is that borrowers may not make informed decisions and may be enticed by lower monthly payments.
Second benefit: higher consumption at points in life when you want to save less
— with lower monthly payments you can consume more and save less, which you may want to do if you are either retired or expect to earn a lot in the future
— with lower monthly payments you can consume more and save less, which you may want to do if you are either retired or expect to earn a lot in the future
November 18, 2025 at 2:34 PM
Second benefit: higher consumption at points in life when you want to save less
— with lower monthly payments you can consume more and save less, which you may want to do if you are either retired or expect to earn a lot in the future
— with lower monthly payments you can consume more and save less, which you may want to do if you are either retired or expect to earn a lot in the future
First benefits to longer maturities: more portfolio diversification
— If you don't amortize, you can save in stocks or more liquid assets.
— Maybe all savings shouldn't be concentrated in a single, illiquid asset.
— If you don't amortize, you can save in stocks or more liquid assets.
— Maybe all savings shouldn't be concentrated in a single, illiquid asset.
November 18, 2025 at 2:34 PM
First benefits to longer maturities: more portfolio diversification
— If you don't amortize, you can save in stocks or more liquid assets.
— Maybe all savings shouldn't be concentrated in a single, illiquid asset.
— If you don't amortize, you can save in stocks or more liquid assets.
— Maybe all savings shouldn't be concentrated in a single, illiquid asset.
Brief summary:
1️⃣ Longer maturities reduce monthly payments.
With a 30-year mortgage and a 6 percent interest rate, the borrower has amortized about 16% of the loan amount after 10 years. With a 50-year mortgage, the borrower has amortized about 4 percent.
1️⃣ Longer maturities reduce monthly payments.
With a 30-year mortgage and a 6 percent interest rate, the borrower has amortized about 16% of the loan amount after 10 years. With a 50-year mortgage, the borrower has amortized about 4 percent.
November 18, 2025 at 2:34 PM
Brief summary:
1️⃣ Longer maturities reduce monthly payments.
With a 30-year mortgage and a 6 percent interest rate, the borrower has amortized about 16% of the loan amount after 10 years. With a 50-year mortgage, the borrower has amortized about 4 percent.
1️⃣ Longer maturities reduce monthly payments.
With a 30-year mortgage and a 6 percent interest rate, the borrower has amortized about 16% of the loan amount after 10 years. With a 50-year mortgage, the borrower has amortized about 4 percent.
Link here: open.substack.com/pub/claesbac...
50-year mortgages: benefits and costs
While longer maturity contracts may make a lot of sense for individual borrowers, the impact on affordability is limited by changes in house prices.
open.substack.com
November 18, 2025 at 2:34 PM
Link here: open.substack.com/pub/claesbac...
Link to paper: claesbackman.github.io/Papers/Perso...
Link to blog post: safe-frankfurt.de/news-latest/...
Link to blog post: safe-frankfurt.de/news-latest/...
claesbackman.github.io
November 12, 2025 at 10:55 AM
Link to paper: claesbackman.github.io/Papers/Perso...
Link to blog post: safe-frankfurt.de/news-latest/...
Link to blog post: safe-frankfurt.de/news-latest/...
💡 Key takeaway: Personal financial advice from close connections improves investment outcomes, highlighting an important distinction from online peer effects in finance.
November 12, 2025 at 10:55 AM
💡 Key takeaway: Personal financial advice from close connections improves investment outcomes, highlighting an important distinction from online peer effects in finance.
A personal relationship means that you probably feel responsible if a risky recommendation goes wrong. This aligns perfectly with what we find in the data: advice-givers emphasize expertise and trustworthiness, and their recommendations lead to better portfolio outcomes.
November 12, 2025 at 10:55 AM
A personal relationship means that you probably feel responsible if a risky recommendation goes wrong. This aligns perfectly with what we find in the data: advice-givers emphasize expertise and trustworthiness, and their recommendations lead to better portfolio outcomes.
Our results resonate with me personally, because it's the type of financial advice I would always give when my friends ask. When someone you care about asks for investment advice, you're motivated to recommend sound, diversified strategies.
November 12, 2025 at 10:55 AM
Our results resonate with me personally, because it's the type of financial advice I would always give when my friends ask. When someone you care about asks for investment advice, you're motivated to recommend sound, diversified strategies.
🔍 Unlike advice shared on anonymous social media platforms, personal financial advice is based on trust and expertise rather than past returns. Those who provide advice are positively selected on experience and financial knowledge, and they internalize the outcomes of their recommendations.
November 12, 2025 at 10:55 AM
🔍 Unlike advice shared on anonymous social media platforms, personal financial advice is based on trust and expertise rather than past returns. Those who provide advice are positively selected on experience and financial knowledge, and they internalize the outcomes of their recommendations.
📊 We study how financial advice from family and friends affects portfolio outcomes. Using unique brokerage data and survey evidence, we find that personal financial advice is widespread and leads to better portfolio quality—more diversification and a preference for funds over single stocks.
November 12, 2025 at 10:55 AM
📊 We study how financial advice from family and friends affects portfolio outcomes. Using unique brokerage data and survey evidence, we find that personal financial advice is widespread and leads to better portfolio quality—more diversification and a preference for funds over single stocks.
These two mechanisms have different implications for regulation, and we are hoping to explore the exact mechanism more in detail in some follow-up work.
June 4, 2025 at 6:48 AM
These two mechanisms have different implications for regulation, and we are hoping to explore the exact mechanism more in detail in some follow-up work.
Two broad mechanism for why amortization payments are costly are i) monthly payment targeting, where households focus on a specific monthly mortgage payment rather than minimizing the lifetime cost of the loan and ii) a desire to save in other assets.
June 4, 2025 at 6:48 AM
Two broad mechanism for why amortization payments are costly are i) monthly payment targeting, where households focus on a specific monthly mortgage payment rather than minimizing the lifetime cost of the loan and ii) a desire to save in other assets.
Second, we show in the model that the amortization requirement will have a significant impact on household wealth accumulation, matching some recent empirical evidence from the Netherlands.
June 4, 2025 at 6:48 AM
Second, we show in the model that the amortization requirement will have a significant impact on household wealth accumulation, matching some recent empirical evidence from the Netherlands.
We use model simulations to show that introducing interest-only mortgages increase aggregate debt and lifetime interest expenses, especially if amortization payments are viewed as a cost. Importantly, this result applies to wealthy borrowers far from borrowing constraints.
June 4, 2025 at 6:48 AM
We use model simulations to show that introducing interest-only mortgages increase aggregate debt and lifetime interest expenses, especially if amortization payments are viewed as a cost. Importantly, this result applies to wealthy borrowers far from borrowing constraints.