COVID-19 mortality risk premium and the interest rate on mortgage loans

Balbinder Singh Gill

International Review of Financial Analysis, 2024, vol. 93, issue C

Abstract: I investigate the impact of COVID-19 on the housing market, with a focus on mortgage interest rates. Rising COVID-19 fatalities result in higher mortgage interest rates. I use the Gaussian Copula approach to establish causality between COVID-19 fatalities and mortgage interest rates. Finally, I present a thorough examination of the mechanisms by which COVID-19 fatalities influence mortgage interest rates. The health concern channel is the most important. Banks raise the interest rate because they are concerned about the borrower's health or potential death. Lower interest rates for borrowers who alleviated this type of worry from banks by purchasing mortgage insurance.

Keywords: Mortgage interest rate; Household finance; COVID-19; Coronavirus; Pandemic (search for similar items in EconPapers)
JEL-codes: E43 G21 G51 Q51 Q54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001157

DOI: 10.1016/j.irfa.2024.103183

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