Till Mortgage Do Us Part: Mortgage Switching Costs and Household’s Bank Switching

Marianna Brunetti, Rocco Ciciretti and Ljubica Djordjevic ()
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Ljubica Djordjevic: SAFE-Goethe University

No 364, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We investigate the role of mortgage switching costs in shaping the households’ decision to change their main bank. To this end, we use a unique panel dataset that enables us to infer household’s bank switching, in conjunction with a legal reform that exogenously slashed down the mortgage switching costs. The empirical evidence, which survives to a variety of robustness checks, supports the hypothesis that the explicit switching costs in the retail banking market are a weighty factor in shaping households’ bank switching, despite any potential “informational lock-in”. Dissecting the results, we show that the effects of the reform were not uniform across households. The more educated households, those with a longer or broader relationship with their previous bank and those residing in ex-ante less competitive banking markets were at the forefront of the wave of bank switching.

Keywords: bank switching; mortgage switching costs; household finance (search for similar items in EconPapers)
JEL-codes: D14 G21 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016-02-02, Revised 2020-05-28
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (4)

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Journal Article: Till mortgage do us part: Mortgage switching costs and household's bank switching (2020)
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