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Is there Discriminatory Mortgage Pricing against Immigrants in the Spanish Lending Market?

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Author Info

  • Diaz-Serrano, Luis

    ()
    (Universitat Rovira i Virgili)

  • Raya, Josep M.

    ()
    (Universitat Pompeu Fabra)

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    Abstract

    In this paper, we investigate whether evidence of discriminatory treatment against immigrants in the Spanish mortgage market exists. More specifically, we test whether, ceteris paribus, immigrant borrowers tend to be charged with higher interest rates on their mortgages than their Spanish born counterparts. To do so, we use a unique dataset on granted mortgages that contains information not only regarding the conditions of the loan but also the socio-economic characteristics of the mortgagors. We observe that immigrants are systematically charged with higher interest rates. We apply the well known Oaxaca-Blinder decomposition to measure the extent to which this disparate treatment of lenders in mortgage pricing against immigrants is due to discrimination. Our results indicate that approximately two thirds of the gap in the interest rate between Spanish born and immigrant borrowers can be attributed to discriminatory treatment.

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    Bibliographic Info

    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5578.

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    Length: 37 pages
    Date of creation: Mar 2011
    Date of revision:
    Publication status: forthcoming as 'Do immigrants face discrimination in the Spanish mortgage market? An analysis of the interest rates' in: Regional Science & Urban Economics.
    Handle: RePEc:iza:izadps:dp5578

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    Related research

    Keywords: mortgage pricing; discrimination; immigration; housing market;

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    1. Diaz-Serrano, Luis, 2005. "Income volatility and residential mortgage delinquency across the EU," Journal of Housing Economics, Elsevier, vol. 14(3), pages 153-177, September.
    2. Alicia H. Munnell, 1992. "Mortgage lending in Boston: interpreting HMDA data," Working Papers 92-7, Federal Reserve Bank of Boston.
    3. Marsha Courchane & David Nickerson, 1997. "Discrimination Resulting from Overage Practices," Journal of Financial Services Research, Springer, vol. 11(1), pages 133-151, February.
    4. Black, Harold & Schweitzer, Robert L & Mandell, Lewis, 1978. "Discrimination in Mortgage Lending," American Economic Review, American Economic Association, vol. 68(2), pages 186-91, May.
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