The Economic Implications of the Introduction of Reverse Mortgages into China
Open Access
Author:
Jiang, Shan
Area of Honors:
Interdisciplinary in Economics and Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
Neil Wallace, Thesis Supervisor James Alan Miles, Thesis Honors Advisor Bee Yan Roberts, Thesis Honors Advisor
Keywords:
Reverse Mortgage Intergeneration Monetary Transfers and Spending
Abstract:
The major objective of this thesis is to assess the impact of the introduction of reverse mortgages on consumer spending and on monetary transfers between old and young generations in China.
There are several findings. First, monetary support from children to their elder parents accounts for a relatively small percentage of children’s income, and the elder parents will likely to transfer a substantial part of reverse mortgage payments to their children. Second, reverse mortgages are likely to boost the spending of both elder and younger generations and increase overall consumer spending significantly. Third, more than 60% of Chinese across all age groups expressed considerable interest in reverse mortgage with highest interests from age group 41-50. Fourth, the implementation of an inheritance tax will increase the willingness of people aged 20-50 to apply for reverse mortgage, but will decrease the willingness of people aged 50 and above to apply.
Overall, the findings suggest that the introduction of reverse mortgages will likely to generate significant social benefits in China.
