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Mortgage Relationships

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  • Brown, Martin

    ()

  • Hoffmann, Matthias

    ()

Abstract

We examine the closeness of relationships between households and their mortgage lenders using survey data which provide information on the duration, geographical proximity and scope of all bank relationships of a representative sample of households. Our analysis is based on a sample of 470 households which have a mortgage and multiple bank relations, allowing us to compare mortgage relations and non-mortgage relations for the same households. We find that mortgage relations are used for a broader scope of payment and saving transactions, have been more recently established, and are held with banks that are located closer to the household than non-mortgage relations. Examining the heterogeneity of mortgage relations across households, we find that financially sophisticated borrowers are less likely to hold their mortgage with a local bank. We find no evidence that more opaque borrowers, e.g. younger and urban households, maintain tighter mortgage relations.

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File URL: http://www1.vwa.unisg.ch/RePEc/usg/sfwpfi/WPF-1310.pdf
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Bibliographic Info

Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1310.

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Length: 22 pages
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:usg:sfwpfi:2013:10

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Related research

Keywords: Mortgage loans; Household finance; Relationship banking.;

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References

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  1. Annamaria Lusardi & Olivia S. Mitchell, 2011. "Financial Literacy and Retirement Planning in the United States," NBER Working Papers 17108, National Bureau of Economic Research, Inc.
  2. Elizabeth Kiser, 2002. "Predicting Household Switching Behavior and Switching Costs at Depository Institutions," Review of Industrial Organization, Springer, vol. 20(4), pages 349-365, June.
  3. Beck, T.H.L. & Büyükkarabacak, B. & Rioja, F. & Valev, N., 2009. "Who Gets the Credit? And Does it Matter? Household vs Firm Lending Across Countries," Discussion Paper 2009-41, Tilburg University, Center for Economic Research.
  4. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  5. Jessica Holmes & Jonathan Isham & Ryan Petersen & Paul M. Sommers, 2007. "Does Relationship Lending Still Matter in the Consumer Banking Sector? Evidence from the Automobile Loan Market," Social Science Quarterly, Southwestern Social Science Association, vol. 88(2), pages 585-597.
  6. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
  7. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 307-362, February.
  8. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
  9. Andra C. Ghent & Marianna Kudlyak, 2011. "Recourse and Residential Mortgage Default: Evidence from US States 1," Review of Financial Studies, Society for Financial Studies, vol. 24(9), pages 3139-3186.
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Cited by:
  1. Brown, Martin & Guin, Benjamin & Morkoetter, Stefan, 2013. "Switching Costs, Deposit Insurance and Deposit Withdrawals from Distressed Banks," Working Papers on Finance 1319, University of St. Gallen, School of Finance.

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