Physics

Climate change

Business

Actuarial science

Climate risk

Salient

Term (time)

Biology

Risk premium

Interest rate

Credit risk

Artificial intelligence

Economics

Ecology

Casualty insurance

Default risk

Computer science

Monetary economics

Quantum mechanics

Mortgage insurance

Mortgage underwriting

Insurance policy

Review of Finance

We show that lenders charge higher interest rates for mortgages on properties exposed to a greater risk of sea level rise (SLR). This SLR premium is not evident in short-term loans and is not related to borrowers’ short-term realized default or creditworthiness. Further, the SLR premium is smaller when the consequences of climate change are less salient and in areas with more climate change deniers. Overall, our results suggest that mortgage lenders view the risk of SLR as a long-term risk and that attention and beliefs are potential barriers through which SLR risk is priced in residential mortgage markets.

Climate Change Risk and the Cost of Mortgage Credit