We draw a distinction between the concepts of purchase affordability (whether a household
is able to borrow enough funds to purchase a house) and repayment affordability (the
burden imposed on a household of repaying the mortgage). We operationalize this
distinction in the context of a new methodology for constructing affordability measures that
draws on the value-at-risk concept and takes account of the whole distribution of household
income and house prices rather than just the median. Empirically we find that the distinction …