We randomize the population into a control or one of five information treatments. The population will receive an email from the Bank with a PDF file attached.
Control Group. A group of people will not get any additional letter through this experiment. They will however receive a standard letter describing the terms of their contract, although at a time pre-set by regulation and independent of the experiment. (All Chileans with mortgages receive this letter.)
Treatment to Change Beliefs of the Possibility of Refinancing. This letter will contain information about the recipient's current mortgage, a statement that alerts the recipient that it is possible to refinance one's mortgage and reduce the monthly payment (and defining what refinancing means), and a link where the recipient could find more information about the terms one can receive. It is on a regular-sized sheet and contains both the logo and the stamp of SERNAC.
Treatment to Alter Beliefs. This treatment arm provides information that alters the bias in the beliefs individuals have about the rates they will obtain in the market. Here, we include the information in the T1 treatment and also add graphical illustrations of where the individual stands in the distribution of prevailing interest rates. This documents (1) a short explanation that different financial institutions will offer different interest rates, (2) an interest rate ``thermometer'' that includes the mortgage holder's current interests and the average prevailing interest rates of refinanced loans that have similar characteristics, and (3) a written explanation of the information in the interest rate thermometer together with a computation that includes annual and total savings for a reduction in the interest rate to the market average. For those who are above the market rate, we show no savings (i.e., we do not show negative savings).
The prevailing market rates are computed using predicted values of a regression of interest rate on various characteristics. In particular, we run a regression of interest rate at the mortgage level on variables like loan amount, term, income, neighborhood (``comuna''), loan type, and whether the loan was a subsidy. Continuous variables are typically binned, and categorical variables are included as separate fixed effects. We then predict the rate using the borrower's current personal and mortgage characteristics, using the month FE for May 2021. The market average will be presented as what a customer would have received on average had they refinanced recently (with fine print outlining the idea behind the procedure).
Treatment to Alter Search Costs. This treatment arm is designed to facilitate search across banks. Since search could be difficult because either (i) customers are unable to compare contracts or because (ii) customers do not even know the process to search, we design a treatment that affects both avenues. First, the letter for this treatment includes the baseline information from above. Second, we include a diagram designed by SERNAC that aims to teach people how to compare different credit offers. Finally, we include a step-by-step checklist for how someone can solicit offers from different banks.
Treatment to Alter Switching Costs. In this treatment arm, we inform the recipient of the Portability Law, which makes it easier to port information between banks. We include the baseline information included in the control and then add a step-by-step checklist for how to change banks.
Full Treatment. This treatment arm includes all information from the previous treatments, aggregated together.