On the rationality of borrowers' behaviour: Comparing risk-attitudes of homeowners

Though time and depth of cycles differed from one European country to another, mortgage markets have grown in size, expanded in product variation and improved borrowers' accessibility to mortgage credit. However, this expanding range of mortgage opportunities significantly increases the search and information costs for a borrower, making it harder for him to find the mortgage with the most favourable cost-risk trade-off. Nonetheless, the research reveals that homeowners are still acting as rational customers, i.e. willing and able to choose the optimal mortgage Meanwile, the cross-country analysis in this study highlights the role of the institutions, household characteristics and the structure of national mortgage markets as key elements in shaping the optimal mortgage for borrowers.OT