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Chasing Lower Rates: How Households Balance Refinancing Incentives and Debt Constraints

Author

Listed:
  • Jiri Gregor
  • Jan Janku

Abstract

This paper examines the determinants of early mortgage refinancing in a market dominated by fixed-rate loans with comparatively short reset periods. Drawing on a matched loan-level dataset covering 2015–2024, we estimate panel logit and Cox proportional hazards models to assess how borrower characteristics market conditions, and macroprudential constraints jointly shape refinancing behaviour. The results show that households react strongly to the spread between their contractual mortgage rate and prevailing market rates, as well as to signals of future rate increases, highlighting the refinancing channel as an important conduit for the transmission of monetary policy even in fixed-rate environments. We further document that borrower indebtedness-captured by LTI, LSTI, and LTV-affects refinancing in a nonlinear manner. Moderate levels of these indicators enhance sensitivity to interest-rate incentives and facilitate refinancing, whereas very elevated values limit the borrower's opportunity or capacity to refinance.

Suggested Citation

  • Jiri Gregor & Jan Janku, "undated". "Chasing Lower Rates: How Households Balance Refinancing Incentives and Debt Constraints," Working Papers 2026/01, Czech National Bank, Research and Statistics Department.
    • Handle: RePEc:cnb:wpaper:2026/01
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    Keywords

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    JEL classification:

    • 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
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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