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Relationship Banking in the Residential Mortgage Market? Evidence from Switzerland

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  • Brown, Martin
  • Hoffmann, Matthias

Abstract

We examine to what extent mortgage lending is characterized by strong relationships between banks and their borrowers. Our analysis is based on detailed survey data covering all current bank relations for a sample of 1,481 Swiss households out of which 687 have a mortgage. We document that mortgage borrowers maintain significantly more bank relations than comparable households without a mortgage. However, this does not imply that mortgage relations are loose. Comparing mortgage relations to other bank relations of the same households we find that mortgage relations are used for a broader scope of transactions and are held with banks that are located closer to the household. Examining the heterogeneity of mortgage relations across households, we find that financially sophisticated households are less likely to hold their mortgage with a local bank.

Suggested Citation

  • Brown, Martin & Hoffmann, Matthias, 2013. "Relationship Banking in the Residential Mortgage Market? Evidence from Switzerland," Working Papers on Finance 1310, University of St. Gallen, School of Finance, revised Jun 2015.
    • Handle: RePEc:usg:sfwpfi:2013:10
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    References listed on IDEAS

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    Cited by:

    1. Djordjevic, Ljubica, 2015. "Essays in household finance," Other publications TiSEM ad3edc86-915e-4ce8-ba38-b, Tilburg University, School of Economics and Management.
    2. Berrak Bahadir & Neven Valev, 2021. "Credit information sharing and the shift in bank lending towards households," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 60-72, January.
    3. Brown, Martin & Henchoz, Caroline & Spycher, Thomas, 2018. "Culture and financial literacy: Evidence from a within-country language border," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 62-85.
    4. Brown, Martin & Guin, Benjamin & Morkoetter, Stefan, 2013. "Deposit Withdrawals from Distressed Commercial Banks: The Importance of Switching Costs," Working Papers on Finance 1319, University of St. Gallen, School of Finance, revised Dec 2017.
    5. Brunetti, M. & Ciciretti, R. & Djordjevic, Lj., 2020. "Till mortgage do us part: Mortgage switching costs and household's bank switching," Journal of Banking & Finance, Elsevier, vol. 119(C).
    6. Brown, Martin & Henchoz, Caroline & Spycher, Thomas, 2017. "Culture and Financial Literacy," Working Papers on Finance 1703, University of St. Gallen, School of Finance.
    7. Brown, Martin & Guin, Benjamin, 2015. "The Exposure of Mortgage Borrowers to Interest Rate Risk, Income Risk and House Price Risk – Evidence from Swiss Loan Application Data," Working Papers on Finance 1509, University of St. Gallen, School of Finance.

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    More about this item

    Keywords

    Mortgage loans; Household finance; Relationship banking.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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