Refinancing Inertia in the Irish Mortgage Market

Kenneth Devine
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Kenneth Devine: Central Bank of Ireland

No 5/RT/22, Research Technical Papers from Central Bank of Ireland

Abstract: Mortgage refinancing is a key household financial decision, with those who fail to refinance losing out on substantial monetary savings. Using a loan level dataset of Irish mortgages, this paper estimates that approximately 67% per cent of unconstrained borrowers did not take up a cost free refinancing offer from their financial institution when it was optimal to do so. I estimate average borrower foregone savings to be €5,400 over the remaining term of the mortgage. This represents a significant household financial mistake, particularly for vulnerable cohorts. I explore the role of borrower and mortgage characteristics, with the presence of financial distress acting as a primary factor in the low levels of engagement.

Keywords: Mortgages; Refinancing; Household Finance. (search for similar items in EconPapers)
JEL-codes: D10 D14 G21 (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-fle and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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