Measuring the Impact of Property Insurance Premiums on the Mortgage Market

We document that increases in property insurance premiums reduce mortgage originations. The effect is strongest for the rate refinancing and cash-out refinancing segments. We show that denials associated with increased premiums are significantly more likely attributed to high debt-to-income ratios and insufficient collateral. Across the income spectrum, the effect is concentrated among highly levered borrowers. Our results suggest that increases in property insurance premiums could attenuate the refinancing channel of monetary policy as fewer borrowers are able to take advantage of lower rates.