The Drivers of Household Over-Indebtedness and Delinquency on Mortgage Loans: Evidence from Italian Microdata

David Aristei () and Manuela Gallo

No 105/2012, Quaderni del Dipartimento di Economia, Finanza e Statistica from Università di Perugia, Dipartimento Economia

Abstract: This paper investigates the main determinants of household delinquency on mortgage loans in Italy. Using a sample-selection ordered choice model, we assess the impact of socio-demographic factors, loan characteristics and institutional variables both on the probability of delinquency in mortgage repayments and on the amount of arrears. Our results, based on microdata from the Italian component of the EU-SILC survey, allow to identify which types of households are more financially vulnerable and show the relevance of institutional factors in affecting the conditional intensity of arrears. Based on the predicted probabilities of arrears, we further analyse the relationship between interest rates on mortgage loans and observed borrower riskiness. Results point out that, in the whole period of analysis, Italian banks have accounted for household credit risk and have used risk-based pricing strategies in the process of mortgage loans granting.

Keywords: Mortgage delinquency; Household over-indebtedness; Ordered choice models; Risk-based pricing (search for similar items in EconPapers)
JEL-codes: C25 D14 E43 G21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012-09-15
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (7)

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