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Endogeneity in household mortgage choice
Citation
Dungey, M and Tchatoka, FD and Yanotti, MB, Endogeneity in household mortgage choice, Economic Modelling, 73 pp. 30-44. ISSN 0264-9993 (2018) [Refereed Article]
Official URL: https://www.sciencedirect.com/science/article/pii/...
DOI: doi:10.1016/j.econmod.2018.03.001
Abstract
We show that failing to correct for both sample selection and endogeneity bias leads to an under-estimate of the importance of mortgage price in determining the mortgage product a household selects. With proprietary, loan-level data from a major Australian mortgage provider we study interest rate determination, loan size and mortgage product choice. The level of mortgage indebtedness varies with the value and characteristics of the property, while individual mortgage interest rates depend on borrower characteristics. Our results show that borrowers consider the initial interest rate and implicitly the loan amount they can access when choosing a mortgage product.
Item Details
Item Type: | Refereed Article |
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Keywords: | mortgages, interest rate, selection bias, endogeneity, IV |
Research Division: | Commerce, Management, Tourism and Services |
Research Group: | Banking, finance and investment |
Research Field: | Financial econometrics |
Objective Division: | Expanding Knowledge |
Objective Group: | Expanding knowledge |
Objective Field: | Expanding knowledge in economics |
UTAS Author: | Dungey, M (Professor Mardi Dungey) |
UTAS Author: | Yanotti, MB (Dr Maria Yanotti) |
ID Code: | 127407 |
Year Published: | 2018 |
Web of Science® Times Cited: | 3 |
Deposited By: | TSBE |
Deposited On: | 2018-07-26 |
Last Modified: | 2018-12-05 |
Downloads: | 0 |
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