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Mortgage Choice Determinants: The Role of Risk and Bank Regulation

Citation

Dungey, M and Doko Tchatoka, FD and Wells, GM and Yanotti, MB, Mortgage Choice Determinants: The Role of Risk and Bank Regulation, Economic Record, 91, (295) pp. 417-437. ISSN 0013-0249 (2015) [Refereed Article]

Copyright Statement

2015 Economic Society of Australia

DOI: doi:10.1111/1475-4932.12205

Abstract

We shed new light on the role of borrower characteristics in mortgage product choice, and how these are impacted by regulatory capital requirements. Using rich loan-level data from the Australian market we analyse the borrower idiosyncratic risk e ects on the choice between variable-rate mortgages (VRMs) and other mort- gages with reduced initial payments. We nd that income, wealth and mobility risks play a role in product choice. We investigate regulatory capital requirements in a market where banks hold mortgage risk on-balance sheet and nd that the Basel capital discounts based on LTV ratios divide otherwise similar borrowers in their mortgage choices.

Item Details

Item Type:Refereed Article
Keywords:Mortgage Choice, Basel, Banks, Loan-to-value ratio
Research Division:Commerce, Management, Tourism and Services
Research Group:Banking, Finance and Investment
Research Field:Financial Institutions (incl. Banking)
Objective Division:Economic Framework
Objective Group:Microeconomics
Objective Field:Microeconomics not elsewhere classified
Author:Dungey, M (Professor Mardi Dungey)
Author:Wells, GM (Associate Professor Graeme Wells)
Author:Yanotti, MB (Dr Maria Yanotti)
ID Code:100920
Year Published:2015
Deposited By:Tasmanian School of Business and Economics
Deposited On:2015-06-03
Last Modified:2017-11-23
Downloads:0

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