Abstract
This study analyzes price discrimination and household switching in the residential mortgage market. Using a unique proprietary micro dataset from Norway, we examine the factors that influence a bank’s choice to counter an offer from a competing bank and the difference between the loan rate paid by current clients when receiving a competing offer from another bank and the concurrent best rate offered to new customers by the current bank. The estimates show that a bank employs internal information to decide how to counter a competing offer and that current clients pay approximately 20 basis points more than new customers. We surmise that new regulations and digitalization enhance transparency and can reduce the rate differential. However, introducing new banking products and changes in the timing of rate differentiation —from immediate upfront to gradually over time —may be used to maintain a constant rate differential.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
