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COVID-19 mortality risk premium and the interest rate on mortgage loans

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  • Gill, Balbinder Singh

Abstract

I investigate the impact of COVID-19 on the housing market, with a focus on mortgage interest rates. Rising COVID-19 fatalities result in higher mortgage interest rates. I use the Gaussian Copula approach to establish causality between COVID-19 fatalities and mortgage interest rates. Finally, I present a thorough examination of the mechanisms by which COVID-19 fatalities influence mortgage interest rates. The health concern channel is the most important. Banks raise the interest rate because they are concerned about the borrower's health or potential death. Lower interest rates for borrowers who alleviated this type of worry from banks by purchasing mortgage insurance.

Suggested Citation

  • Gill, Balbinder Singh, 2024. "COVID-19 mortality risk premium and the interest rate on mortgage loans," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001157
    DOI: 10.1016/j.irfa.2024.103183
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    More about this item

    Keywords

    Mortgage interest rate; Household finance; COVID-19; Coronavirus; Pandemic;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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