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Endogeneity in household mortgage choice
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Dungey, M
ORCID: 0000-0003-0074-2314, Tchatoka, FD and Yanotti, MB
ORCID: 0000-0001-9797-9582 2018
, 'Endogeneity in household mortgage choice'
, Economic Modelling, vol. 73
, pp. 30-44
, doi: 10.1016/j.econmod.2018.03.001.


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Official URL: https://www.sciencedirect.com/science/article/pii/...
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.
Item Type: | Article |
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Authors/Creators: | Dungey, M and Tchatoka, FD and Yanotti, MB |
Keywords: | mortgages, interest rate, selection bias, endogeneity, IV |
Journal or Publication Title: | Economic Modelling |
Publisher: | Elsevier Science Bv |
ISSN: | 0264-9993 |
DOI / ID Number: | 10.1016/j.econmod.2018.03.001 |
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Item Statistics: | View statistics for this item |
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