Endogeneity in household mortgage choice
Date
2018
Authors
Dungey, M.
Doko Tchatoka, F.
Yanotti, M.
Editors
Advisors
Journal Title
Journal ISSN
Volume Title
Type:
Journal article
Citation
Economic Modelling, 2018; 73:30-44
Statement of Responsibility
Mardi Dungey, Firmin Doko Tchatoka, María B. Yanotti
Conference Name
Abstract
We show that failing to correct for both sample selection and endogeneity bias leads to an under-estimate of the importance of mortgage price in determining the mortgage product a household selects. With proprietary, loan-level data from a major Australian mortgage provider we study interest rate determination, loan size and mortgage product choice. The level of mortgage indebtedness varies with the value and characteristics of the property, while individual mortgage interest rates depend on borrower characteristics. Our results show that borrowers consider the initial interest rate and implicitly the loan amount they can access when choosing a mortgage product.
School/Discipline
Dissertation Note
Provenance
Description
Available online 2 April 2018
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Rights
Crown Copyright © 2018 Published by Elsevier B.V. All rights reserved.