Hello Sam,
The income team is currently undertaking a significant review of the calculation of housing costs and will be making substantial revisions to the derived housing cost variables. For further information, please refer to Housing costs on the Understanding Society website. (It says 2023 but should say 2024). This review includes updates to imputation models, additional data cleaning, and testing of different methods for separating interest from capital repayments. Various methods for this separation are yielding different outcomes, and the Income team is assessing which method works best and its implications for data quality.
Here is the Income team's feedback on your specific query:
w_xpmgint_dv is the estimated interest within w_xpmg_dv. For short-period mortgages, it is based on data on current interest rates times the outstanding principal. For mortgages with more than two years to run based on a standard repayment mortgage formula (using BofE interest rate and estimated remaining life).
We are currently redoing our imputation models. In broad terms, the current models proceed as follows: median mortgage payment is used for imputing missing waves where some waves are reported and imputing this value for households where no report of mortgage payment is given. Using chained equations median estimated house value, outstanding mortgage and remaining mortgage life are estimated.
On the share of the mortgage, which is interest, we are experimenting with two methods:
1) current Bank of England interest rate times estimated outstanding mortgage (the FRS method)
2) using a fixed rate mortgage formula based on the current Bank of England interest rate and the estimated remaining life.
I hope this information is helpful.
Best wishes,
Roberto Cavazos
Understanding Society User Support Team
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