Climate Change Risk and the Costs of Mortgage Credit

Duc Duy Nguyen, Steven Ongena, Shusen Qi and Vathunyoo Sila
Additional contact information
Duc Duy Nguyen: King's College London
Shusen Qi: Xiamen University - School of Management

No 20-97, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We show that lenders charge higher interest rates for mortgages on properties exposed to a greater risk of Sea Level Rise (SLR). This SLR premium is not evident in short-term loans and is not related to borrowers’ short-term realized default or creditworthiness. Further, the SLR premium is smaller when the consequences of climate change are less salient and in neighborhoods with more climate change deniers. Overall, our results suggest that mortgage lenders view the risk of SLR as a long-term risk, and that lack of attention and beliefs are potential barriers that inhibit the pricing of climate-related risk in residential mortgage markets.

Keywords: bank loans; residential mortgage; climate change risk; sea level rise (search for similar items in EconPapers)
JEL-codes: G14 Q54 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2020-11
New Economics Papers: this item is included in nep-env and nep-ure
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Climate Change Risk and the Cost of Mortgage Credit* (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2097

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