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Price Discrimination and Mortgage Choice

Author

Listed:
  • Coen, Jamie
  • Kashyap, Anil K
  • Rostom, May

Abstract

We characterize the large number of mortgage offers for which people qualify in the United Kingdom. Very few pick the cheapest option, nonetheless the one selected is not usually noticeably more expensive. A few borrowers make very expensive choices. These are most common when the menu they face has many expensive options, and are most likely for high loan-to-value and loan-to-income borrowers. Young people and first-time buyers are more prone to making expensive choices. The dispersion in the mortgage menu is consistent with banks price discriminating for borrowers who might pick poorly, while competing for others who shop more effectively.

Suggested Citation

  • Coen, Jamie & Kashyap, Anil K & Rostom, May, 2023. "Price Discrimination and Mortgage Choice," CEPR Discussion Papers 18478, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18478
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    More about this item

    Keywords

    Price discrimination; Mortgages;

    JEL classification:

    • 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
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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