Disentangling the Effects of Household Financial Constraints and Risk Profile on Mortgage Rates
Posted: 8 Feb 2018
Date Written: January 30, 2018
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: Suggested Citation