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Bank-Specific Daily Interest Rate Adjustment in the Dutch Mortgage Market

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  • Leo Haan

    ()

  • Elmer Sterken

    ()

Abstract

We analyze the mortgage interest rate setting behavior of the four largest banks in the Dutch mortgage market using advertised interest rates at a daily frequency from October 1997 to July 2003. We find that the pass-through of funding cost changes into mortgage interest rates on 5 and 10 year loans differs among these banks. Further, there is evidence of asymmetric price adjustment, in the sense that funding cost increases are more quickly passed on than decreases.

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File URL: http://hdl.handle.net/10.1007/s10693-010-0095-2
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Bibliographic Info

Article provided by Springer in its journal Journal of Financial Services Research.

Volume (Year): 39 (2011)
Issue (Month): 3 (June)
Pages: 145-159

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Handle: RePEc:kap:jfsres:v:39:y:2011:i:3:p:145-159

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Web page: http://www.springerlink.com/link.asp?id=102934

Related research

Keywords: Asymmetric pricing; Mortgage loans; Error Correction Model; G21; L13;

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References

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  1. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, 02.
  2. Maria Arbatskaya & Michael R. Baye, 2004. "Are Prices ‘Sticky’ Online? Market Structure Effects and Asymmetric Responses to Cost Shocks in Online Mortgage Markets," Working Papers 2004-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  3. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
  4. Toolsema, Linda A. & Jacobs, Jan, 2001. "Why do prices rise faster than they fall? : with an application to mortgage rates," CCSO Working Papers 200106, University of Groningen, CCSO Centre for Economic Research.
  5. Daniel Levy & Mark Bergen & Shantanu Dutta & Robert Venable, 2005. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," Macroeconomics 0505012, EconWPA.
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  9. Corvoisier, Sandrine & Gropp, Reint, 2001. "Bank Concentration and Retail Interest Rates," Working Paper Series 0072, European Central Bank.
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  12. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
  13. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  14. Ana-Maria Fuertes & Shelagh A. Heffernan, 2009. "Interest rate transmission in the UK: a comparative analysis across financial firms and products," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 45-63.
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  17. Boris Hofmann & Paul Mizen, 2004. "Interest Rate Pass-Through and Monetary Transmission: Evidence from Individual Financial Institutions' Retail Rates," Economica, London School of Economics and Political Science, vol. 71, pages 99-123, 02.
  18. Michiel van Leuvensteijn & Wolter Hassink, 2003. "Price-setting and price dispersion in the Dutch mortgage market," CPB Discussion Paper 21, CPB Netherlands Bureau for Economic Policy Analysis.
  19. Allen, Marcus T & Rutherford, Ronald C & Wiley, Marilyn K, 1999. "The Relationships between Mortgage Rates and Capital-Market Rates under Alternative Market Conditions," The Journal of Real Estate Finance and Economics, Springer, vol. 19(3), pages 211-21, November.
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Citations

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Cited by:
  1. Toolsema, Linda A. & Jacobs, Jan, 2001. "Why do prices rise faster than they fall? : with an application to mortgage rates," CCSO Working Papers 200106, University of Groningen, CCSO Centre for Economic Research.
  2. Kok, Christoffer & Lichtenberger, Jung-Duk, 2007. "Mortgage interest rate dispersion in the euro area," Working Paper Series 0733, European Central Bank.
  3. Abbas Valadkhani & Sajid Anwar, 2012. "Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 341-350, 09.
  4. Abbas Valadkhani & Sajid Anwar & Amir Arjonandi, 2012. "How to capture the full extent of price stickiness in credit card interest rates?," Economics Working Papers wp12-02, School of Economics, University of Wollongong, NSW, Australia.
  5. Paraschiv, Florentina, 2012. "Adjustment Policy of Deposit Rates in the Case of Swiss non-Maturing Savings Accounts," Working Papers on Finance 1219, University of St. Gallen, School of Finance.
  6. Al-Shboul, Mohammad & Anwar, Sajid, 2014. "Foreign exchange rate exposure: Evidence from Canada," Review of Financial Economics, Elsevier, vol. 23(1), pages 18-29.
  7. John Ashton & Andros Gregoriou, 2012. "The Influence of Banking Centralisation on Depositors: Regional Heterogeneities in the Transmission of Monetary Policy," Working Papers 12005, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  8. Leo de Haan & Elmer Sterken, 2006. "Price Leadership in the Dutch Mortgage Market," DNB Working Papers 102, Netherlands Central Bank, Research Department.
  9. Valadkhani, Abbas, 2013. "The pricing behaviour of Australian banks and building societies in the residential mortgage market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 133-151.
  10. Elmer Sterken, 2006. "Competition in the Dutch Mortgage Market," De Economist, Springer, vol. 154(4), pages 587-600, December.
  11. Jason Allen & Darcey McVanel, 2009. "Price Movements in the Canadian Residential Mortgage Market," Working Papers 09-13, Bank of Canada.
  12. John Ashton & Andros Gregoriou & Jerome V. Healy, 2013. "The relative influence of price and choice factors on retail deposit quantities," Working Papers 13006, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  13. Valadkhani, Abbas, 2013. "Do petrol prices rise faster than they fall when the market shows significant disequilibria?," Energy Economics, Elsevier, vol. 39(C), pages 66-80.

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