What is it about?
Offering discounted mortgage rates can attract more price-sensitive borrowers, which may translate into lower loyalty and higher dissatisfaction. Borrower-based mortgage regulations also shape competition: clients at, or close to, regulatory limits tend to be less loyal and more likely to switch banks.
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Why is it important?
Understanding more about client price sensitivity and loyalty is crucial in shaping banks' pricing and marketing strategies.
Perspectives
From my perspective, aggressive discounting is a double-edged strategy. It brings in borrowers who are highly rate-aware and quick to act when a slightly better offer appears, so the relationship can start with a transactional mindset rather than trust. That dynamic can also amplify dissatisfaction: if the “deal” they expected fades relative to the market, they feel they’ve lost value even if the absolute rate is still reasonable. I also see borrower-based limits as quietly steering competition. Clients close to LTV/DTI caps have fewer degrees of freedom, and small changes in pricing or lending terms matter more—so they shop harder and switch faster when an opening appears. In practice, this means retention isn’t just about service quality; it’s tightly linked to how pricing strategy and regulation jointly sort customers by mobility.
Endre Jo Reite
Norwegian University of Science and Technology
Read the Original
This page is a summary of: Mortgage pricing, borrower-based limits, and retention, Finance Research Letters, March 2026, Elsevier,
DOI: 10.1016/j.frl.2026.109576.
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