This paper analyses the role of brands in the mortgage market by studying the rebranding of a small subsidiary bank under the more popular parent brand. The objective is to evaluate, using both empirical techniques and a theoretical model, whether brand popularity increases households' awareness of the products offered on the market, thereby improving their ability to select the cheapest option.
A well-known brand name makes it easier to find and access information on products offered by the bank, encouraging households to select, other things being equal, cheaper mortgages among those available on the market. The model calibrated on Italian data implies an overall saving equal to 6 per cent of the initial loan amount and a roughly 10-percentage-point increase in the share of households that shift to cheaper lenders.
