Template-Type: ReDIF-Article 1.0

Author-Name: Eszter Baranyai
Author-Workplace-Name: Magyar Nemzeti Bank, Corvinus University of Budapest
Author-Email: eszter.baranyai@uni-corvinus.hu

Author-Name: Adam Banai
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: banaia@mnb.hu
Author-Person:	pba1291


Title: Feeling the Heat: Mortgage Lending and Central Bank Options

Abstract: Extreme heat periods due to the global climate change are having a negative
impact on many areas of the economy. In our study, we look at how much US
mortgage lending goes to the areas that are most vulnerable to future heat waves,
and what government and central bank actions could mitigate the resulting risk.
From our results, we see that proportionally more lending flows into the areas
that are likely to be most exposed to heat in the future. Population and economic
output are relatively higher in these areas, and thus climate risk is less of a factor in
lending decisions. However, lenders reject proportionately slightly more mortgage/
loan applications in the counties that are expected to be the hottest. Central bank
and supervisory authority measures to support climate objectives are therefore
of key importance. These could include, for example, central bank asset purchase
programmes to support sustainable construction, especially in areas vulnerable to
climate change, or the development of collateral management along similar lines.
Coordination between the different authorities is also important because of the
limitations of central bank actions.

Classification-JEL: E58, G21, Q54
Keywords: climate change, heat, mortgage lending, USA, central bank, supervisory authority
Pages: 5-31
Volume: 21
Issue: 1
Year: 2022
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-21-1-st1-baranyai-banai.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:21:y:2022:i:1:p:5-31