The rise of risk-based pricing of mortgage interest rates in Italy

Silvia Magri () and Raffaella Pico

Journal of Banking & Finance, 2011, vol. 35, issue 5, 1277-1290

Abstract: This paper assesses how much mortgage interest rates in Italy are priced on credit risk as proxied by the probability of household mortgage delinquency estimated using the EU-Silc database. Owing to data availability, we restrict the analysis of mortgage pricing to Italian households. Consistent with the more widespread use of credit scoring, estimates indicate that Italian lenders have increasingly priced mortgage interest rates on household credit risk. For mortgages granted between 2000 and 2007, we find that a 1% point increase in the probability of default is associated with a 21 basis point rise in mortgage interest rates, lower than the 38 basis point premium Edelberg (2006) estimated for the US at the end of the 1990s.

Keywords: Mortgage; interest; rate; Mortgage; delinquencies; Risk-based; pricing (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Working Paper: The rise of risk-based pricing of mortgage interest rates in Italy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:5:p:1277-1290

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