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We exploit a U.K. government-sponsored product and provide evidence on shared equity mortgages. The analysis shows how the interaction of house price growth and leverage regulation promotes product adoption. Following an increase in the equity limit, households use the additional financing to buy more expensive properties rather than reduce leverage. Equity used as a complement to debt is likely less beneficial for financial stability than when used as a substitute. Equity borrowers are less likely to change lenders when refinancing their senior debt. Finally, we measure the equity provider returns, which are affected by selection and undervaluation at repayment.

Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.