مقاله انگلیسی رایگان در مورد بی سوادی مالی و تصمیمات بازپرداخت وام – الزویر ۲۰۱۸

Introduction

In 2007 the Italian government passed new legislation, granting households the right to refinance their mortgage at no cost, regardless of the contractual prepayment fee that had been agreed upon at the time of mortgage origination. Other than prepayment fees, all other costs associated with mortgage refinancing (e.g., notary fees, registration fees, etc.) were also eliminated. This intervention has produced a break in the previously rigid Italian mortgage market, where the overall cost of refinancing was extremely high (from 5 to 8 percent of the principal). Consequently, fixed-rate mortgage (FRM) borrowers have experienced the opportunity to cash in a sizeable gain from the sharp interest rate drop which has since occurred. In this paper, we employ a large proprietary dataset of approximately 147 thousand FRMs issued by a primary Italian bank, and we estimate that the cross-section average refinancing gain for fixed-rate borrowers has reached 15 percent of the average principal balance. This figure corresponds to a €۱۱۲ reduction of the monthly instalment and an annual saving slightly lower than the average monthly income in our sample (about €۱٫۵k). Despite this important gain, we document that only a scant minority of FRM borrowers (about 13 percent) has taken advantage of this opportunity in the 8 and a half years following the introduction of the new legislation. Two main possible financial motivations may explain this sluggish behavior. First, the economic convenience of refinancing an FRM only arises if the new prevailing market conditions are more favorable than those at the loan’s inception. This gap depends on both the evolution of base interest rates and credit spreads, and the point in time at which the mortgage originated. For approximately one-tenth of households in our sample this difference is on average negative. Second, since both the subprime and the European sovereign debt crises fall in our investigation period, we capture the effects of the credit crunch, when banks generally tightened credit supply. A stricter lending policy might have excluded some borrowers who would otherwise have been willing to capture the gain offered by the new law.