Determinants of interest rate thresholds for mortgage borrowers’ transition to digital financial channels

This study investigates the determinants of the interest rate differential required by mortgage consumers to switch from traditional face-to-face channels to digital channels. Using the 2022 to 2023 “Housing Finance and Bogeumjari Loan Demand Survey” conducted by the Korea Housing Finance Corporation, the analysis employs a regression model incorporating regional and year dummy variables to control for structural differences across locations and survey periods. The results show that the required interest rate differential varies systematically by region, housing tenure, income level, and household structure. Non-metropolitan residents tended to accept smaller rate differentials than Seoul residents, whereas Jeonsei tenants, lower-income groups, and single-person households tended to demand larger differentials when considering the shift to digital channels. These findings suggest that structural factors such as housing tenure characteristics, income constraints, and regional variations in financial access, shape consumer responsiveness to digital mortgage channels. By quantifying consumer thresholds for rate differentials, this study provides empirical evidence that can inform the design of tailored financial policies and digital channel strategies that account for income and regional heterogeneity.