Paying Too Much? Borrower Sophistication and Overpayment in the US Mortgage Market

Neil Bhutta, Andreas Fuster and Aurel Hizmo
Additional contact information
Neil Bhutta: Federal Reserve Bank of Philadelphia
Aurel Hizmo: Board of Governors of the Federal Reserve System

No 24-21, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Comparing mortgage rates that borrowers obtain to rates that lenders could offer for the same loan, we find that many homeowners significantly overpay for their mortgage, with overpayment varying across borrower types and with market interest rates. Survey data reveal that borrowers' mortgage knowledge and shopping behavior strongly correlate with the rates they secure. We also document substantial variation in how expensive and profitable lenders are, without any evidence that expensive loans are associated with a better borrower experience. Despite many lenders operating in the US mortgage market, limited borrower sophistication may provide lenders with market power.

Pages: 93 pages
Date: 2024-03
New Economics Papers: this item is included in nep-ban and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4747318 (application/pdf)

Related works:
Working Paper: Paying Too Much? Borrower Sophistication and Overpayment in the US Mortgage Market (2024)
Working Paper: Paying Too Much? Borrower Sophistication and Overpayment in the US Mortgage Market (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2421

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().