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

Author

Listed:
  • Santiago Carbó-Valverde

    (Bangor Business School, CUNEF and Funcas)

  • Sergio Mayordomo

    (Banco de España)

  • Francisco Rodríguez-Fernández

    (University of Granada and Funcas)

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.

Suggested Citation

  • Santiago Carbó-Valverde & Sergio Mayordomo & Francisco Rodríguez-Fernández, 2018. "Disentangling the Effects of Household Financial Constraints and Risk Profile on Mortgage Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 56(1), pages 76-100, January.
    • Handle: RePEc:kap:jrefec:v:56:y:2018:i:1:d:10.1007_s11146-016-9595-7
    DOI: 10.1007/s11146-016-9595-7
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    2. Eva Horvatova, 2020. "Twenty Years of Mortgage Banking in Slovakia," IJFS, MDPI, vol. 8(3), pages 1-30, September.

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    More about this item

    Keywords

    Households; Mortgages; Financial constraints; Credit risk;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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