The determinants of households' repayment difficulties on mortgage loans: evidence from Italian microdata

摘要

This article investigates the main determinants of households' repayment difficulties on mortgage loans in Italy. We contribute to the empirical literature on household financial vulnerability by assessing the joint impact of socio-demographic factors, loan characteristics and institutional variables on the likelihood of mortgage insolvency and on the intensity of arrears. Using data from the Italian component of the 2008 European Union-Statistics on Income and Living Conditions (EU-SILC) survey, we firstly identify which types of households are more vulnerable to unexpected adverse events that may trigger repayment difficulties. Specifically, households whose head is young, unemployed or immigrant show a higher probability of arrears and emerge as those suffering more from the adverse economic conditions connected to the crisis. Moreover, household repayment behaviour is affected by mortgage characteristics and, in particular, having modified contract terms significantly increases current arrears probability. Finally, regional institutional and credit market factors mainly impact on the conditional intensity of arrears. This evidence suggests that, although repayment difficulties mainly arise from a genuine inability to repay, households are less likely to pay on time when institutions are less effective at punishing default, confirming the existence of some strategic behaviour.