Why do some residential mortgages carry a fixed interest rate and others an adjustable rate? To answer this question we studied unique data from 103 banks belonging to 73 different banking groups across twelve countries in the euro area. To explain the large cross-country and time variations observed, we distinguished between the conditions that determine the local demand for credit and the characteristics of banks that supply credit. As bank funding mostly occurs at the group level, we disentangled these two sets of factors by comparing the outcomes observed for the same banking group across the different countries. Local demand conditions dominate. In particular we find that the share of new loans with a fixed rate is larger when: (1) the historical volatility of inflation is lower, (2) the correlation between unemployment and the short-term interest rate is higher, (3) households' financial literacy is lower, and (4) the use of local mortgages to back covered bonds and of mortgage-backed securities is more widespread.