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Cost of Credit and House Prices

Author

Listed:
  • Yusuf Emre Akgunduz
  • H. Ozlem Dursun-de Neef
  • Yavuz Selim Hacihasanoglu
  • Fatih Yilmaz

Abstract

This paper studies the relationship between house prices and financing conditions. In the analysis, it exploits a sudden reduction in the mortgage rates of state-owned banks in Turkey during the summer of 2020 as an exogenous shock to provide causal estimates of the cost of credit on house prices. The effects are estimated using a detailed dataset on all house sales with mortgages. Our results show that a 1 percentage point decrease in annual interest rates raised house prices by 2.1%. This impact is driven by a corresponding increase in individual mortgage loans of 6.6%.

Suggested Citation

  • Yusuf Emre Akgunduz & H. Ozlem Dursun-de Neef & Yavuz Selim Hacihasanoglu & Fatih Yilmaz, 2021. "Cost of Credit and House Prices," Working Papers 2106, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2106
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2021/21-06
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    More about this item

    Keywords

    Mortgage rates; Mortgage lending; House prices;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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