We study how individuals respond to the removal of a saving constraint. Mortgage run-offs predictably relax a saving constraint for borrowers who chose mortgage contracts that committed them to effectively save by paying down mortgage principal. Using the universe the Danish populations we...

We build an empirical model to attribute delays in mortgage refinancing to psychological refinancing costs that inhibit refinancing until incentives are strong enough; and to behavior---potentially attributable to information-gathering costs---that lowers the probability that a household...

We build an empirical model to decompose delays in mortgage refinancing into time-dependent inaction (a low probability of responding to a refinancing incentive in a given quarter) and state- dependent inaction (a psychological addition to the financial cost of refinancing). We estimate the...

A common problem in household finance is that households are often inactive in response to incentives. Mortgages are generally the largest household liability, and mortgage refinancing is an important channel for monetary policy transmission, so inactivity in this setting can be socially costly....