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Price Movements in the Canadian Residential Mortgage Market

Author

Listed:
  • Jason Allen
  • Darcey McVanel

Abstract

The authors empirically analyze the price-setting behaviour of the major Canadian banks in the residential mortgage market over the period 1991–2007. They use weekly posted prices of the major mortgage providers to study the degree of competition in mortgage price setting. Their results suggest that the residential mortgage market is imperfectly competitive. They find distinct price leaders and that, as market concentration increases, so does price dispersion - helped by the increased use of discounting from posted prices. The authors also find that, although banks' pass-through of input price changes to mortgage prices is complete in the long run under reasonable assumptions regarding discounting, there exists some level of pricing asymmetry in the short run.

Suggested Citation

  • Jason Allen & Darcey McVanel, 2009. "Price Movements in the Canadian Residential Mortgage Market," Staff Working Papers 09-13, Bank of Canada.
  • Handle: RePEc:bca:bocawp:09-13
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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/02/wp09-13.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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, September.
    2. repec:bpj:sndecm:v:21:y:2017:i:5:p:20:n:3 is not listed on IDEAS
    3. Lou, Weifang & Yin, Xiangkang, 2014. "The impact of the global financial crisis on mortgage pricing and credit supply," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 336-363.
    4. Hélène Desgagnés, 2017. "The Rise of Non-Regulated Financial Intermediaries in the Housing Sector and its Macroeconomic Implications," Staff Working Papers 17-36, Bank of Canada.
    5. Popiel Michal Ksawery, 2017. "Interest rate pass-through: a nonlinear vector error-correction approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(5), pages 1-20, December.
    6. Kronick, Jeremy, 2015. "Do Loan-to-Value Ratio Regulation Changes Affect Canadian Mortgage Credit?," MPRA Paper 73671, University Library of Munich, Germany.
    7. 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.
    8. 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.

    More about this item

    Keywords

    Financial Financial institutions; Financial services;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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