Price Discrimination and Mortgage Choice

Jamie Coen, Anil K Kashyap and May Rostom

No 18478, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We characterize the large number of mortgage offers for which people qualify in the United Kingdom. Very few pick the cheapest option, nonetheless the one selected is not usually noticeably more expensive. A few borrowers make very expensive choices. These are most common when the menu they face has many expensive options, and are most likely for high loan-to-value and loan-to-income borrowers. Young people and first-time buyers are more prone to making expensive choices. The dispersion in the mortgage menu is consistent with banks price discriminating for borrowers who might pick poorly, while competing for others who shop more effectively.

Keywords: Price discrimination; Mortgages (search for similar items in EconPapers)
JEL-codes: D12 G21 G51 G53 (search for similar items in EconPapers)
Date: 2023-09
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