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The Response of Debtors to Rate Changes

Author

Listed:
  • Andreas Fuster

    (École Polytechnique Fédérale de Lausanne (EPFL); Swiss Finance Institute; Centre for Economic Policy Research (CEPR))

  • Virginia Gianinazzi

    (Nova School of Business and Economics; Università della Svizzera italiana (USI), Lugano; Swiss Finance Institute)

  • Andreas Hackethal

    (Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE)

  • Philip Schnorpfeil

    (Goethe University Frankfurt)

  • Michael Weber

    (National Bureau of Economic Research (NBER); Purdue University - Daniels School of Business)

Abstract

How borrowers respond to future changes in the interest rate on their debt matters for the transmission of monetary policy and for household financial stability. Combining bank data, a letter RCT, and a survey, we study this question in the context of the German mortgage market, where since 2022 borrowers have faced high interest rates when their rate fixation period ends. We find that borrower actions substantially reduce the impact of higher rates on monthly payments. Survey responses corroborate high informedness and a strong propensity to prepare for rate changes. The letter intervention does not affect rate beliefs but increases awareness of available options and refinancing among borrowers close to expiration of their rate fixation.

Suggested Citation

  • Andreas Fuster & Virginia Gianinazzi & Andreas Hackethal & Philip Schnorpfeil & Michael Weber, 2026. "The Response of Debtors to Rate Changes," Swiss Finance Institute Research Paper Series 26-11, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2611
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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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