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Mortgages, immigrants and discrimination: An analysis of the interest rates in Spain

  • Diaz-Serrano, Luis
  • Raya, Josep M.

In this paper, we use a unique data set on granted mortgages to investigate whether immigrant and native borrowers are treated differently by lenders in the Spanish mortgage market. We observe that immigrant borrowers are charged substantially higher interest rates in their mortgages than their native counterparts. These differentials remain high and significant even after controlling for differences in creditworthiness and other factors. Further analyses based on the decomposition of the native–immigrant interest rate gap reveal that the differences in observable factors only account for 12% of the gap. The empirical evidence we find here suggests that these differentials are due to discrimination.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 45 (2014)
Issue (Month): C ()
Pages: 22-32

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Handle: RePEc:eee:regeco:v:45:y:2014:i:c:p:22-32
Contact details of provider: Web page: http://www.elsevier.com/locate/regec

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  1. Harold A. Black & Thomas P. Boehm & Ramon P. DeGennaro, 2001. "Is there discrimination in mortgage pricing? the case of overages," Working Paper 2001-4, Federal Reserve Bank of Atlanta.
  2. David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 1998. "Discrimination in the Small Business Credit Market," NBER Working Papers 6840, National Bureau of Economic Research, Inc.
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  7. Degryse, Hans & Ongena, Steven, 2007. "The impact of competition on bank orientation," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 399-424, July.
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  10. Albert Saiz & Susan Wachter, 2011. "Immigration and the Neighborhood," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 169-88, May.
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  13. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2005. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 151-184, February.
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  16. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  17. Marsha J. Courchane, 2007. "The Pricing of Home Mortgage Loans to Minority Borrowers: How Much of the APR Differential Can We Explain?," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 399-440.
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