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Interest rate changes and borrower search behavior


  • Lukas, M.
  • Nöth, M.


Borrower search behavior regarding an outside lender is correlated with interest rate changes. The results of a survey among German households reveal that surprisingly few mortgage borrowers switch to an outside lender when refinancing in a period of declining interest rates although non-switching borrowers face significantly higher interest rates. A laboratory experiment which adds the case of rising interest rates reveals that borrowers’ efforts to screen offers by outside lenders are significantly higher when interest rates rise than when they fall. This behavior cannot be reconciled with alternative explanations. Overall, several billion € p.a. are transferred to lenders.

Suggested Citation

  • Lukas, M. & Nöth, M., 2019. "Interest rate changes and borrower search behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 172-189.
  • Handle: RePEc:eee:jeborg:v:163:y:2019:i:c:p:172-189
    DOI: 10.1016/j.jebo.2019.03.020

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    More about this item


    Household finance; Banking; Relationship lending; Mortgages; Experimental finance;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior


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