Birds of a feather indebted together: Peer-effects on mortgage decisions

Àkos Aczél and Lajos Szabó
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Àkos Aczél: Central Bank of Hungary

French Stata Users' Group Meetings 2023 from Stata Users Group

Abstract: We examine peer-effects in mortgage borrowing decisions. We find that having a financially literate colleague improves the borrowing decision of financially less literate co-workers. The interest rate of the mortgage loan of these co-workers is significantly lower than similar employees at other companies who do not have such a colleague. The magnitude of the effect is economically significant, roughly one-fourth of the standard deviation of mortgage loan interest rates. Placebo and robustness tests verify our results. Roughly one-third of the effect is due to which bank is chosen by the borrower. The results are heterogeneous in the strength of competition among banks. In those districts where the competition is lower, the peer effect is considerably higher.

Date: 2023-08-11
New Economics Papers: this item is included in nep-ban and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:boc:fsug23:20

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