We analyze the effect of an exogenous shock to the Italian mortgage market. A new reform passed in 2007 has abolished prepayment fees and simplified mortgage refinancing, making it akin to a cost-free decision to households. This law — along with the almost simultaneous drop in market interest...

We analyze the effect of an exogenous shock to the Italian mortgage market, where a reform has abolished prepayment fees and simplified mortgage refinancing, making it a virtually cost-free decision for households. This law, along with the considerable drop in market interest rates, has...