Consumer expertise or credit risk?: an empirical analysis of mortgage pricing

• José María Barrutia ^[1] ; María Paz Espinosa ^[1]
  1. [1] UPV/EHU
• Localización: XXII Congreso Nacional de Marketing: Oviedo, del 22 al 24 septiembre de 2010 / Asociación Española de Marketing (aut.), 2010, ISBN 978-84-7356-711-4, pág. 127
• Idioma: inglés
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• Resumen

  • Loan mortgage interest rates are usually the result of a bank-customer negotiation process. We argue that, since mortgage loan is a complex product, consumer expertise could influence the customer bargaining power in the negotiation. Thus far, consumer expertise has not been considered as a relevant factor for mortgage pricing. Using data on mortgage loan prices for a sample of 1092 households for the year 2005 (Bank of Spain Survey of Household Finances, EFF-2005), and including credit risk, costs, potential capacity of the consumer to generate future business and bank competition variables, the regression results indicate that consumer expertise-related metrics are highly significant as predictors of mortgage loan spreads.