Abstract
SummaryWe examine to what extent mortgage lending is characterized by strong relationships between banks and their borrowers. Our analysis is based on survey data covering all current bank relations for a sample of 1,481 Swiss households out of which 687 have a mortgage. We document that mortgage borrowers maintain significantly more bank relations than comparable households without a mortgage. However, this does not imply that mortgage relations are loose. Comparing mortgage relations to other bank relations of the same households we find that mortgage relations are used for a broader scope of transactions and are held with banks that are located closer to the household. Examining the heterogeneity of mortgage relations across households, we find that financially sophisticated households are less likely to hold their mortgage with a local bank.
Highlights
In most developed economies residential mortgages are the predominant type of bank loans and by far the most important financial liabilities of households.1 Switzerland is no exception: The outstanding volume of mortgage loans currently amounts to 145 % of GDP and accounts for 85 % of all domestic bank loans.2 Given the importance of mortgage loans for both banks and households it is surprising how little we know about the relations between mortgage lenders and their clients
Even if mortgage borrowers do maintain more bank relations than households without a mortgage this does not imply that mortgage relations themselves are loose
Based on survey data covering all bank relations of 1,481 Swiss households we examine to what extent the residential mortgage market is characterized by relationship banking
Summary
We examine to what extent mortgage lending is characterized by strong relationships between banks and their borrowers. Our analysis is based on survey data covering all current bank relations for a sample of 1,481 Swiss households out of which 687 have a mortgage. We document that mortgage borrowers maintain significantly more bank relations than comparable households without a mortgage. This does not imply that mortgage relations are loose. Examining the heterogeneity of mortgage relations across households, we find that financially sophisticated households are less likely to hold their mortgage with a local bank. A Swiss Institute of Banking and Finance, University of St. Gallen, email: martin.brown@unisg. B Swiss Institute of Banking and Finance, University of St. Gallen, email: matthias.hoffmann
Sign-in/Register to view highlights & summary 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
