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Climate change concerns and mortgage lending

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  • Duan, Tinghua
  • Li, Frank Weikai

Abstract

We examine whether beliefs about climate change affect loan officers’ mortgage lending decisions. We show that abnormally high local temperature leads to elevated attention to and belief in climate change in a region. Loan officers approve fewer mortgage applications and originate lower amounts of loans in abnormally warm weather. This effect is stronger among counties heavily exposed to the risk of sea-level rise, during periods of heightened public attention to climate change, and for loans originated by small lenders. Additional tests suggest that the negative relation between temperature and approval rate is not fully explained by changes in local economic conditions and demand for mortgage credit, or deteriorating quality of loan applicants. By contrast, Fintech lenders partially fill the gap in demand left by traditional lenders when local temperature is abnormally high.

Suggested Citation

  • Duan, Tinghua & Li, Frank Weikai, 2024. "Climate change concerns and mortgage lending," Journal of Empirical Finance, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:empfin:v:75:y:2024:i:c:s0927539823001123
    DOI: 10.1016/j.jempfin.2023.101445
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    Cited by:

    1. Bellocca, Gian Pietro Enzo & Poncela Blanco, Maria Pilar, 2024. "Extreme temperatures and the profitability of large European firms," DES - Working Papers. Statistics and Econometrics. WS 44217, Universidad Carlos III de Madrid. Departamento de Estadística.
    2. Fátima Sol Murta & Paulo Miguel Gama, 2024. "Sustainability and the domestic credit market: worldwide evidence," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(4), pages 827-845, December.

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    More about this item

    Keywords

    Climate change; Global warming; Mortgage origination; Temperature anomaly;
    All these keywords.

    JEL classification:

    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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