The Exposure of Mortgage Borrowers to Interest Rate Risk, Income Risk and House Price Risk – Evidence from Swiss Loan Application Data
Journal
Swiss Journal of Economics and Statistics
ISSN
0303-9692
Type
journal article
Date Issued
2015-08-01
Author(s)
Abstract
We study the exposure of mortgage borrowers in Switzerland to interest rate, income and house price risks and examine how the households' choice of risky mortgages is related to individual interest rate expectations and risk-aversion. Our analysis is based on a unique data set of household mortgage applications from September 2012 until January 2014. Our assessment of risk exposure among mortgage borrowers in Switzerland is highly sensitive to the underlying assumptions on mortgage costs, household income and house value. Our main results suggest that
the exposure of mortgage borrowers to interest rate and house price risks is limited in the medium-term. We further document that the choice of mortgage contract seems to be more influenced by affordability concerns than risk concerns. In particular, individual interest rate expectations hardly affect mortgage contract choice.
the exposure of mortgage borrowers to interest rate and house price risks is limited in the medium-term. We further document that the choice of mortgage contract seems to be more influenced by affordability concerns than risk concerns. In particular, individual interest rate expectations hardly affect mortgage contract choice.
Language
English
Keywords
Mortgage Default
Mortgage Choice
Household Finance
Mortgage Risk
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Lang
Publisher place
Bern
Volume
2
Number
1
Start page
3
End page
37
Pages
35
Subject(s)
Eprints ID
241138
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15_09_Brown_Guin_TheExposure_ofMortgageBorrowers_toInterestRateRisk.pdf
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Format
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