Determinants of households' switching demand and execution

In this paper, we use a unique survey of mortgage holders conducted by the Central Bank of Ireland to explore how nancial and behavioural characteristics such as nancial literacy, mistrust towards nancial institutions and risk... [ view full abstract ]

In this paper, we use a unique survey of mortgage holders conducted by the Central Bank of Ireland to explore how nancial and behavioural characteristics such as nancial literacy, mistrust towards nancial institutions and risk tolerance, determine whether households switch or refinance their mortgage. Our empirical methodology is novel and separately models whether households consider switching (have positive demand) and households who actually do switch. This two-step process provides new insights into the determinants of nancial product switching and our study is the rst in the literature to explore this issue in such a manner. Our results reveal that while nancial planning skills and mistrust determine households demand for switching or refinancing, tolerance towards risk drives the actual decision to switch or renance. We explore whether these behavioural insights interact with other socio-economic and nancial characteristics and lead to heterogeneous responses across households.