Risk-based pricing of interest rates for consumer loans

• 成果类型: Article
• 署名作者: Edelberg, Wendy
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.moneco.2005.09.001
• 发表日期: 2006
• 页码: 2013-2028
• 关键词: consumption; borrowing; debt; Consumer credit; Interest rates; banking

摘要

By focusing on observable default risk's role in loan terms and the subsequent consequences for household behavior, this paper shows that lenders increasingly used risk-based pricing of interest rates in consumer loan markets during the mid-1990s. It tests three resulting predictions: First, the premium paid per unit of risk should have increased over this period. Second, debt levels should have reacted accordingly. Third, fewer high-risk households should have been denied credit, further contributing to the interest rate spread between the highest- and lowest-risk borrowers. For people obtaining loans, the premium paid per unit of risk did indeed become significantly larger after the mid-1990s. For example, for a 0.01 increase in the probability of bankruptcy, the corresponding interest-rate increase tripled for first mortgages, doubled for automobile loans and rose nearly six-fold for second mortgages. Additionally, changes in borrowing levels and debt access reflected these new pricing practices, particularly for secured debt. Borrowing increased most for the low-risk households who saw their relative borrowing costs fall. Furthermore, while very high-risk households gained expanded access to credit, the increases in their risk premiums implied that their borrowing as a whole either rose less or, sometimes, fell. (c) 2006 Elsevier B.V. All rights reserved.