Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208356
Authors: 
Albertazzi, Ugo
Fringuellotti, Fulvia
Ongena, Steven
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper 2322
Abstract: 
Why do residential mortgages carry a fixed or an adjustable interest rate? To answer this question we study unique data from 103 banks belonging to 73 different banking groups across twelve countries in the euro area. To explain the large cross-country and time variation observed, we distinguish between the conditions that determine the local demand for credit and the characteristics of banks that supply credit. As bank funding mostly occurs at the group level, we disentangle these two sets of factors by comparing the outcomes observed for the same banking group across the different countries. Local demand conditions dominate. In particular we find that the share of new loans with a fixed rate is larger when: (1) the historical volatility of in ation is lower, (2) the correlation between unemployment and the short-term interest rate is higher, (3) households' financial literacy is lower, and (4) the use of local mortgages to back covered bonds and mortgage-backed securities is more widespread.
Subjects: 
mortgages
interest rate fixation
cross-border banks
JEL: 
F23
G21
G41
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3891-4
Document Type: 
Working Paper

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