Price discrimination and mortgage choice

55 Pages Posted: 7 Jul 2021

See all articles by Jamie Coen

Jamie Coen

Bank of England

Anil K. Kashyap

University of Chicago, Booth School of Business; National Bureau of Economic Research (NBER); Federal Reserve Bank of Chicago

May Rostom

Bank of England

Date Written: June 25, 2021

Abstract

We characterise the large number of mortgage offers for which people qualify. Almost no one picks the cheapest option, nonetheless the one selected is not usually much more expensive. A few borrowers make very expensive choices. These big mistakes are most common when the menu they face has many expensive options, and are most likely for high loan to value and loan to income borrowers. Young people and first-time buyers are more mistake-prone. The dispersion in the mortgage menu is consistent with banks attempting to price discriminate for some borrowers who might pick poorly while competing for others who might shop more effectively.

Keywords: Price discrimination, consumer choice, mortgages

JEL Classification: G21, G51, G53, D12

Suggested Citation

Coen, Jamie and Kashyap, Anil K. and Rostom, May, Price discrimination and mortgage choice (June 25, 2021). Bank of England Working Paper No. 926, Available at SSRN: https://ssrn.com/abstract=3879581 or http://dx.doi.org/10.2139/ssrn.3879581

Jamie Coen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Anil K. Kashyap (Contact Author)

University of Chicago, Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7260 (Phone)
773 702-0458 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-7260 (Phone)
773-702-0458 (Fax)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

May Rostom

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
135
Abstract Views
578
Rank
383,693
PlumX Metrics