We build a model of the mortgage market where banks attain their optimal mortgage portfolio by setting rates and "steering" customers. "Sophisticated" households know which mortgage type is best for them, while "naïve" ones are susceptible to steering by their banks. Using data on the universe...

We build a model of the mortgage market where banks attain their optimal mortgage portfolio by setting rates and steering customers. Sophisticated households know which mortgage type is best for them; naive households are susceptible to banks' steering. Using data on the universe of Italian...