Counteroffers and Price Descrimination in Mortgage Lending

Steven Ongena, Florentina Paraschiv and Endre J Reite
Additional contact information
Florentina Paraschiv: Zeppelin University, Chair of Finance; Norwegian University of Science and Technology, Faculty of Economics and Management, NTNU Business School; University of St. Gallen, Institute for Operations Research and Computational Finance
Endre J Reite: NTNU Department of International Business

No 21-67, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This study analyzes price discrimination and household switching in the residential mortgage market. Analyzing a unique proprietary micro dataset from Norway, we examine what influences a bank’s choice to counter an offer from a competing bank and the difference between the loan rate paid by current clients when receiving a competing offer from another bank and the concurrent best rate offered to new customers by the current bank. The estimates show that a bank employs internal information to decide how to counter a competing offer and that current clients pay around 20 basis points more than new customers. We surmise that new regulations and digitalization enhance transparency, and can reduce the rate differential. However, introducing new banking products and changes in the timing of rate differentiation —from immediate upfront to gradual over time —may be used to keep the rate differential constant.

Keywords: Mortgage lending; Financial regulation; Consumer protection; digitalization; Price discrimination (search for similar items in EconPapers)
JEL-codes: C41 D12 D14 G21 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2021-09, Revised 2023-05
New Economics Papers: this item is included in nep-ban, nep-pay, nep-reg and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Counteroffers and Price Discrimination in Mortgage Lending (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2167

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