Swiss Journal of Economics and Statistics

, Volume 152, Issue 1, pp 23–48 | Cite as

Relationship Banking in the Residential Mortgage Market? Evidence from Switzerland

  • Martin Brown
  • Matthias Hoffmann
Open Access


We examine to what extent mortgage lending is characterized by strong relationships between banks and their borrowers. Our analysis is based on survey data covering all current bank relations for a sample of 1,481 Swiss households out of which 687 have a mortgage. We document that mortgage borrowers maintain significantly more bank relations than comparable households without a mortgage. However, this does not imply that mortgage relations are loose. Comparing mortgage relations to other bank relations of the same households we find that mortgage relations are used for a broader scope of transactions and are held with banks that are located closer to the household. Examining the heterogeneity of mortgage relations across households, we find that financially sophisticated households are less likely to hold their mortgage with a local bank.


mortgage loans household finance relationship banking 


G21 D14 


  1. Agarwal, S., S. Chomsisengphet, C. Liu, and N. S. Souleles (2010), “Benefits of Relationship Banking: Evidence from Consumer Credit Markets”, Working Paper Series WP-2010-05, Federal Reserve Bank of Chicago.Google Scholar
  2. Ai, C., and E. C. Norton (2003), “Interaction Terms in Logit and Probit Models”, Economics Letters, 80(1), pp. 123–129.CrossRefGoogle Scholar
  3. Basten, C., and C. Koch (2015), “House Prices, Mortgage Demand and Mortgage Supply: Causal Evidence from a Shift-Share Experiment”, Journal of Housing Economics, 30, pp. 1–22.CrossRefGoogle Scholar
  4. Basten, C., B. Guin, and C. Koch (2015), “Demand and Supply of Mortgages: The Role of Interest Rate Risk and Credit Risk”, unpublished manuscript.Google Scholar
  5. Beck, T., B. Büyükkarabacak, F. Rioja, and N. Valev (2012), “Who Gets the Credit? And Does It Matter? Household vs Firm Lending Across Countries”, B. E. Journal of Macroeconomics, 12(1).Google Scholar
  6. Berger, A., and G. Udell (1995), “Relationship Lending and Lines of Credit in Small Firm Finance”, Journal of Business, 68, pp. 351–381.CrossRefGoogle Scholar
  7. Blankson, C., J. Ming-Sung Cheng, and N. Spears (2007), “Determinants of Banks Selection in USA, Taiwan and Ghana”, International Journal of Bank Marketing, 25(7), pp. 469–489.CrossRefGoogle Scholar
  8. Boot, A. W. A. (2000), “Relationship Banking: What Do We Know?”, Journal of Financial Intermediation, 9(1), pp. 7–25.CrossRefGoogle Scholar
  9. Brown, M., and R. Graf (2013), “Financial Literacy and Retirment Planning in Switzerland”, Numeracy, 6, Article 6.Google Scholar
  10. Brown, M., and B. Guin (2015), “The Exposure of Mortgage Borrowers to Interest Rate Risk and House Price Risk — Evidence from Swiss Loan Application Data”, Swiss Journal of Economics and Statistics, 151(2), pp. 89–123.CrossRefGoogle Scholar
  11. Bucks B. K., A. B. Kennickell, T. L. Mach and K. B. Moore (2009), “Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances”, Federal Reserve Bulletin (February), pp. A1–A56.Google Scholar
  12. Devlin, J. F. (2002a), “An Analysis of Choice Criteria in the Home Loans Market”, The International Journal of Bank Marketing, 20(4/5), pp. 212–226.CrossRefGoogle Scholar
  13. Devlin, J. F. (2002b), “Customer Knowledge and Choice Criteria in Retail Banking”, Journal of Strategic Marketing, 10(4), pp. 273–290.CrossRefGoogle Scholar
  14. European Central Bank (2013), “The Euro System Household Finance and Consumption Survey: Results from the First Wave”, Eurosystem Household Finance and Consumption Network Statistics Paper Series No. 2.Google Scholar
  15. Guiso, L., P. Sapienza, and L. Zingales (2013), The Determinants of Attitudes towards Strategic Default on Mortgages, Journal of Finance, 68, pp. 1473–1515.CrossRefGoogle Scholar
  16. Ghent, A., and M. Kudlayk (2011), “Recourse and Residential Mortgage Default: Evidence from the U.S. States”, Review of Financial Studies 24, pp. 3139–3186.CrossRefGoogle Scholar
  17. Holmes, J., J. Isham, R. Petersen, and P. M. Sommers (2007), “Does Relationship Lending Still Matter in the Consumer Banking Sector? Evidence from the Automobile Loan Market”, Social Science Quarterly 88(2), pp. 585–597.CrossRefGoogle Scholar
  18. Kiser, E. K. (2002), “Predicting Household Switching Behavior and Switching Costs at Depository Institutions”, Review of Industrial Organization, 20(4), pp. 349–365.CrossRefGoogle Scholar
  19. Kysucky, V., and L. Norden (2016), “The Benefits of Relationship Lending in a Cross-Country Context: A Meta-Analysis”, Management Science, 62(1), pp. 90–110.Google Scholar
  20. Lusardi, A., and O. S. Mitchell (2011), “Financial Literacy and Retirement Planning in the United States”, Journal of Pension Economics and Finance, 10(4), pp. 509–525.CrossRefGoogle Scholar
  21. Lymperopoulos, C., I. E. Chaniotakis, and M. Soureli (2006), “The Importance of Service Quality in Bank Selection for Mortgage Loans”, Managing Service Quality, 16(4), pp. 365–379.CrossRefGoogle Scholar
  22. Morgan Stanley (2010), Understanding Strategic Defaults — ABS Insights.Google Scholar
  23. Mylonakis, J. (2007), “A Bank Customer Analysis and Mortgage Services Evaluation: Implications of Market Segmentation Policies”, Banks and Bank Systems, 2(3), pp. 157–157.Google Scholar
  24. Puri, M., J. Rocholl, and S. Steffen (2013), “What Kinds of Bank-Client Relationships Matter in Reducing Loan Defaults and Why?”, Working paper.Google Scholar

Copyright information

© Swiss Society of Economics and Statistics 2016

Authors and Affiliations

  1. 1.Swiss Institute of Banking and FinanceUniversity of St. GallenSwitzerland

Personalised recommendations