Disentangling the Effects of Household Financial Constraints and Risk Profile on Mortgage Rates

Posted: 8 Feb 2018

See all articles by Santiago Carbo-Valverde

Santiago Carbo-Valverde

Bangor Business School; Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF)

Sergio Mayordomo

Banco de España

Francisco Rodriguez-Fernandez

University of Granada - Department of Economic Theory and History

Multiple version iconThere are 2 versions of this paper

Date Written: January 30, 2018

Abstract

In this paper we disentangle the impact of household financial constraints on mortgage rate from a number of dimensions of credit risk. This analysis relies on a dataset that contains information on the economic and financial decisions of Spanish households in four different years: 2002, 2005, 2008, and 2011. Our results suggest that banks' profitable customers are able to bargain for lower mortgage rates. However, contrary to other studies, the risk profile does not have a significant effect on mortgage rates. Credit institutions tend to charge higher rates during the crisis to all customers, irrespective of their risk profiles.

Keywords: Households; Mortgages; Financial Constraints; Credit Risk

JEL Classification: G21; R21

Suggested Citation

Carbo-Valverde, Santiago and Mayordomo, Sergio and Rodriguez-Fernandez, Francisco, Disentangling the Effects of Household Financial Constraints and Risk Profile on Mortgage Rates (January 30, 2018). Journal of Real Estate Finance and Economics, Vol. 56, No. 1, 2018. Available at SSRN: https://ssrn.com/abstract=3113591

Santiago Carbo-Valverde

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF) ( email )

Serrano Anguita 9
Madrid, Madrid 28004
Spain

Sergio Mayordomo (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Francisco Rodriguez-Fernandez

University of Granada - Department of Economic Theory and History ( email )

Granada
Spain

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