Model 4 changes all of our main benchmark toward lender’s refinancing costs, i

Within robustness checks we ran various changes of our own main model step 1 and this we have talked about in the previous sentences. The outcomes of them inspections is actually demonstrated inside Table 7, less than. From inside the design step 1 of our own robustness testing, we do not is lags your depending changeable Rates of interest for very long-Identity Individual Mortgages. In this design the newest magnitude of coefficient of your changeable Consumer Shelter having Early Cost (Dummy) is much more than the ones from brand new patterns that include lags, see the over causes. From inside the design dos i go after some of the considerations placed off within quote means (see a lot more than) and you can ban the year dummies from our model, leading to a reduced VIF value to own Benchmark Refinancing Pricing (). Model 3 replaces area of the explanatory dummy changeable that we utilized to check on the study hypothesis because of the categorical varying User Security to possess Early Cost (Categorical), look for our conversation towards Individual Security List, significantly more than. Contained in this model, the brand new coefficient of one’s group typical Accountability cover or lender’s a lot more management expenditures try statistically tall during the 5% top, while the coefficient of your group higher No charge isnt. age. new Italian language home loan ties, with our alternative benchmark, we.elizabeth. the eye costs for long-name governmental bonds for every single Member County (look for significantly more than). Contained in this model all of our head in search of will not persist, the latest coefficient of your varying Consumer Cover getting Early Installment (Dummy) is not statistically tall any kind of time old-fashioned quantity of advantages. Although not, in the design 5, and therefore combines both changes introduced for the models step 3 and you will cuatro, the fresh coefficient of your own group high No charge of one’s Individual Safeguards to have Early Cost (Categorical) variable, was statistically tall at 5% peak. Model six and you can eight is earliest variation regression habits. The former excludes 12 months dummy variables additionally the latter is sold with all of them. Right here the new coefficient of one’s User Defense to own Early Fees (Dummy) adjustable is statistically extreme regarding former model, but not regarding the second model. In both models the newest mean VIF values are particularly low (Model 6: 1.06 and you will Design eight: 5.42). Total, all of our head results, i.elizabeth. you to a boost in user protection to have very early repayments results in high rates of interest to have mortgages, is stable during almost all model specifications.

8 Conclusions

This paper suggests analytically you to definitely a right to very early installment from an extended-identity financial credit rating which have fixed rates for the European user defense law you will disappear instead of boost individual interests. Which trying to find was next offered, when the lookup result of behavioral economics, especially losings aversion, condition quo bias and you may weighted odds are part of the research.

A danger averse consumer has not the latest readiness to expend the full can cost you of one’s solution as part of the interest rate of borrowing

A directly to early cost is also yet not help the variance of requested progress about borrowing from the bank contract, when interest levels slip immediately after contract formation, also it gets profitable to change the existing high appeal borrowing from the bank from the another low interest borrowing from the bank. Ignacio loans Next a customer correct off early repayment advances the difference out of upcoming money channels and results in an appeal loss getting exposure averse customers when the their particular asked get on contract remains undamaged. The right will then be perhaps not inside the or their attract on enough time the latest price is actually concluded. It the main right hasn’t the smoothness regarding an enthusiastic insurance rates however, regarding a lottery otherwise a choice deal. So it a portion of the directly to very early fees decreases consumer appeal. To the contrary, the traditional signal away from presumption damages having infraction from deal eliminates one bonuses to displace an old high attention deal with good the low interest rates offer that will be insofar more effective. As well as, the authority to early installment metropolises a lump exposure for the banking companies as for the a time period of low passions all of the debtors features an enthusiastic incentive to get rid of the fresh new deal. This may sometimes produce extreme interest rate draw ups when you look at the large notice symptoms or to a withdrawal from banking institutions regarding providing long term repaired interest rates to own user financial credits. A small straight to early fees is actually therefore advisable. A bright-line rule, and this combines user safeguards which have individual passions and you will monetary overall performance you are going to be to produce the best merely to men and women consumers, which need sell their residence consequently they are ergo forced to pay back the borrowed funds prematurely.