Price discrimination and mortgage choice

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 25 June 2021

Staff Working Paper No. 926

By Jamie Coen, Anil Kashyap and May Rostom

We characterise the large number of mortgage offers for which people qualify. Almost no one picks the cheapest option, nonetheless the one selected is not usually much more expensive. A few borrowers make very expensive choices. These big mistakes are most common when the menu they face has many expensive options, and are most likely for high loan to value and loan to income borrowers. Young people and first-time buyers are more mistake-prone. The dispersion in the mortgage menu is consistent with banks attempting to price discriminate for some borrowers who might pick poorly while competing for others who might shop more effectively.

Price discrimination and mortgage choice

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