Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336486 
Year of Publication: 
2025
Series/Report no.: 
MNB Working Papers No. 2025/3
Publisher: 
Magyar Nemzeti Bank, Budapest
Abstract: 
We examine peer effects in mortgage borrowing decisions. We find that having financially literate colleagues improves the borrowing decisions of financially less literate co-workers. Interest rates on the mortgage loans of these co-workers are significantly lower than for similar employees, whose peers have lower financial literacy. The magnitude of the effect is economically significant, amounting to roughly 4 to 5 monthly instalments until maturity. The results are heterogeneous: advice is more valuable for borrowers with low mathematical skills, and the peer effect is considerably higher in districts, where competition is weaker among banks. We also find that introducing a standardised loan product can offset the impact of the peer effect by making the decision problem of borrowers less complex.
Subjects: 
peer effects
skills
borrowing decisions
mortgage loan
standardised loan product
JEL: 
J24
G21
G41
Document Type: 
Working Paper

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