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Mortgage Choice Determinants: The Role of Risk and Bank Regulation
journal contributionposted on 2023-05-18, 10:35 authored by Dungey, M, Doko Tchatoka, FD, Graeme WellsGraeme Wells, Maria YanottiMaria Yanotti
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.
Publication titleEconomic Record
PublisherWiley-Blackwell Publishing Asia
Place of publicationAustralia
Rights statement© 2015 Economic Society of Australia