COVID-19 mortality risk premium and the interest rate on mortgage loans

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Abstract

I investigate the impact of COVID-19 on the housing market, with a focus on mortgage interest rates. Rising COVID-19 fatalities result in higher mortgage interest rates. I use the Gaussian Copula approach to establish causality between COVID-19 fatalities and mortgage interest rates. Finally, I present a thorough examination of the mechanisms by which COVID-19 fatalities influence mortgage interest rates. The health concern channel is the most important. Banks raise the interest rate because they are concerned about the borrower's health or potential death. Lower interest rates for borrowers who alleviated this type of worry from banks by purchasing mortgage insurance.

Original languageEnglish
Article number103183
JournalInternational Review of Financial Analysis
Volume93
DOIs
StatePublished - May 2024

Keywords

  • Coronavirus
  • COVID-19
  • Household finance
  • Mortgage interest rate
  • Pandemic

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