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Monetary Conditions and Community Redistribution through Mortgage Markets

Author

Listed:
  • Manish Gupta

    (Nottingham University Business School)

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

Abstract

We examine the redistributive impact of 30-year mortgage and federal funds rates on mortgage lending between 1995 and 2021. Between 2008 and 2014, the Fed deployed Quantitative Easing (QE) by purchasing mortgage-backed securities, intendedly lowering mortgage rates. We find that lending is regressive pre-QE, becomes progressive during the QE era, and then reverts to being regressive following the QE's conclusion until 2019. Nonbank lending becomes regressive when the federal funds rate increases between 2015 and 2019, and this pattern persists during the pandemic. In contrast, while banks lend regressively until 2019, they refinance progressively during the pandemic.

Suggested Citation

  • Manish Gupta & Steven Ongena, 2024. "Monetary Conditions and Community Redistribution through Mortgage Markets," Swiss Finance Institute Research Paper Series 24-28, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2428
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    More about this item

    Keywords

    Inequality; Mortgage; Financial Crisis; Quantitative Easing (QE); COVID-19; Nonbanks;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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