Italians’ choice between fixed and variable interest rate in the mortgage market: an empirical investigation.

This thesis empirically analyses the determinants of the choice between fixed-rate mortgages and adjustable-rate mortgages in the Italian market, focusing on the period 2001-2010. The analysis is based on data collected from surveys conducted by the Bank of Italy, which enabled an examination of individual and family characteristics and their interaction with the market conditions. The empirical model, developed using logistic regression, reveals that a higher initial mortgage amount and an extended mortgage duration are associated with a slight decrease in the probability of opting for a variable rate. The historical context plays a decisive role: while the period 2001-2005 is characterized by a predominance of fixed-rate choices, the period following the global financial crisis (2008-2010) favours the adoption of a variable rate, highlighting that expectations regarding future rate trends significantly influence borrowers’ decisions. A particularly interesting result concerns risk attitude, whose influence appears counterintuitive: lower risk aversion is associated with a propensity toward a fixed rate. Despite some limitations related to the specificity of the sample and the nature of the data employed, the study provides relevant insights for further research, contributing to a deeper understanding of the complex decision-making process in the mortgage market.