The cost of steering in financial markets: Evidence from the mortgage market
We build a model of the mortgage market in which banks attain their optimal mortgage portfolio by setting rates and steering customers. Sophisticated households know which mortgage type is best for them; naive households are susceptible to banks’ steering. Using data on the universe of Italian mortg...
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| Veröffentlicht in: | Journal of financial economics 2022-03, Vol.143 (3), p.1209-1226 |
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| container_end_page | 1226 |
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| container_issue | 3 |
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| container_title | Journal of financial economics |
| container_volume | 143 |
| creator | Guiso, Luigi Pozzi, Andrea Tsoy, Anton Gambacorta, Leonardo Mistrulli, Paolo Emilio |
| description | We build a model of the mortgage market in which banks attain their optimal mortgage portfolio by setting rates and steering customers. Sophisticated households know which mortgage type is best for them; naive households are susceptible to banks’ steering. Using data on the universe of Italian mortgages, we estimate the model and quantify the welfare implications of steering. The average cost of the distortion is equivalent to 16% of the annual mortgage payment. A financial literacy campaign is beneficial for naive households, but hurts sophisticated ones. Since steering also conveys information about mortgages, restricting steering might result in significant welfare losses. |
| doi_str_mv | 10.1016/j.jfineco.2021.05.013 |
| format | Article |
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| ispartof | Journal of financial economics, 2022-03, Vol.143 (3), p.1209-1226 |
| issn | 0304-405X 1879-2774 |
| language | eng |
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| source | Elsevier ScienceDirect Journals Complete |
| subjects | Campaigns Consumer protection COVID-19 Customers Distortion Financial advice Financial literacy Households Mortgage market Mortgages Steering Welfare |
| title | The cost of steering in financial markets: Evidence from the mortgage market |
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