Gaston Illanes, Northwestern University

Households often fail to refinance mortgages, foregoing substantial
savings in interest payments. This is especially the case of poor households with
limited access to information on how to refinance. We implement a large-scale
experiment on all mortgage holders in a large Chilean bank to study whether light-
touch informational interventions affect the incidence of refinancing and the extent of
search. Our study population are mostly low income borrowers. We randomly assign
mortgage holders to receive one of five emails about their mortgage and track their
search and refinancing behavior over time. These emails differ in the type and extent
of the information provided and are each designed to target one possible behavioral
friction leading to this inertia. We find that the most effective intervention—giving
both information about savings and details of how to refinance—approximately
doubles the incidence of refinancing requests, with significantly larger effects for
those who would save the most from doing so. Using a simple framework, we discuss
the implications of information and search frictions for mortgage rate markups and
the passthrough of monetary policy.