Loan Performance of Contractual Savings for Housing

24 Pages Posted: 1 Mar 2017 Last revised: 22 Mar 2017

See all articles by Hans-Peter Burghof

Hans-Peter Burghof

University of Hohenheim

Marlis Schairer

University of Hohenheim

Date Written: February 28, 2017

Abstract

We argue that the combination of a loan with a mandatory saving period as a precondition for loan approval can be used as a mechanism to improve the creditworthiness of the pool of borrowers. This result is based on the argument that the personal creditworthiness of a borrower is strongly correlated with his ability to save on a regular basis. Using in house data of a large German CSH supplier we estimate a Cox Proportional Hazard Model to show that default rates of CSH contracts are in fact lower than those of comparable loans. This effect remains after controlling for other information on the creditworthiness of the borrower.

Keywords: Contractual Savings for Housing, Mortgage Default, Relationship Lending

JEL Classification: G21, D14

Suggested Citation

Burghof, Hans-Peter and Schairer, Marlis, Loan Performance of Contractual Savings for Housing (February 28, 2017). Available at SSRN: https://ssrn.com/abstract=2925104 or http://dx.doi.org/10.2139/ssrn.2925104

Hans-Peter Burghof

University of Hohenheim ( email )

Schloss Hohenheim
510F
Stuttgart, 70599
Germany
+49 711 459 22900 (Phone)
+49 711 459 23448 (Fax)

Marlis Schairer (Contact Author)

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
189
Abstract Views
1,323
Rank
289,210
PlumX Metrics