On the Rationality of Borrowers’ Behaviour: Comparing Risk Attitudes of Homeowners

  • Peter Neuteboom TU Delft, Architecture and the Built Environment

Synopsis

'On the Rationality of Borrowers’ Behaviour' was prompted by two observations: first, mortgage take-up amongst homeowners was fairly divergent across Europe, and second, the fact that this was seen by academic researchers as well as policymakers and financial authorities as an indication of fundamental differences in the risk attitudes of homeowners. Although the time and depth of the cycles differed from one European country to another, mortgage markets have grown in size, expanded in product variation and improved borrowers’ accessibility to mortgage credit. However, this expanding range of mortgage opportunities significantly increases the search and information costs for a borrower, making it harder for him to find the mortgage with the most favourable cost-risk trade-off. Nonetheless, the research reveals that homeowners are still acting as rational customers, i.e. willing and able to choose the optimal mortgage. Meanwhile, the cross-country analysis in this study highlights the role of the institutions, household characteristics, and the structure of national mortgage markets as key elements in shaping the optimal mortgage for homeowners.

Cover for On the Rationality of Borrowers’ Behaviour: Comparing Risk Attitudes of Homeowners

Details about this monograph

ISBN-13 (15)
978-1-58603-918-9
Date of first publication (11)
2008-10-01
Physical Dimensions
165mmx240mm
Online ISSN: 1879-8330
Print ISSN: 1574-6410
Categories
Rights
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.