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Asymmetric Price Adjustment in the Dutch Mortgage Market

  • Leo de Haan
  • Elmer Sterken

We analyze the mortgage interest rate setting behavior of the four largest banks in the Dutch mortgage market using advertised interest rates at a daily frequency from October 1997 to July 2003. We find that the pass-through of funding cost changes into mortgage interest rates on 5 and 10 year loans differs among these banks. Further, there is evidence of asymmetric price adjustment, in the sense that funding cost increases are more quickly passed on than decreases.

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File URL: http://www.dnb.nl/binaries/Working%20Paper%2061-2005_tcm46-146718.pdf
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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 061.

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Date of creation: Dec 2005
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Handle: RePEc:dnb:dnbwpp:061
Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam
Web page: http://www.dnb.nl/en/

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  1. Mackinnon, J.G. & Haug, A.A. & Michelis, L., 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," G.R.E.Q.A.M. 96a09, Universite Aix-Marseille III.
  2. Severin Borenstein & A. Colin Cameron, 1992. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," NBER Working Papers 4138, National Bureau of Economic Research, Inc.
  3. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
  4. Corvoisier, Sandrine & Gropp, Reint, 2002. "Bank concentration and retail interest rates," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2155-2189, November.
  5. Michiel van Leuvensteijn & Wolter Hassink, 2003. "Price-setting and price dispersion in the Dutch mortgage market," CPB Discussion Paper 21, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, June.
  7. Allen, Marcus T & Rutherford, Ronald C & Wiley, Marilyn K, 1999. "The Relationships between Mortgage Rates and Capital-Market Rates under Alternative Market Conditions," The Journal of Real Estate Finance and Economics, Springer, vol. 19(3), pages 211-21, November.
  8. Levy, Daniel, et al, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 791-825, August.
  9. Degryse, H.A. & Ongena, S., 2002. "Distance, Lending Relationships and Competition," Discussion Paper 2002-16, Tilburg University, Center for Economic Research.
  10. Bettendorf, Leon & Geest, Stephanie van der & Kuper, Gerard, 2005. "Do daily retail gasoline prices adjust asymmetrically?," CCSO Working Papers 200503, University of Groningen, CCSO Centre for Economic Research.
  11. David Neumark & Steven A. Sharpe, 1989. "Market structure and the nature of price rigidity: evidence from the market for consumer deposits," Finance and Economics Discussion Series 52, Board of Governors of the Federal Reserve System (U.S.).
  12. Sam Peltzman, 1998. "Prices Rise Faster Than They Fall," University of Chicago - George G. Stigler Center for Study of Economy and State 142, Chicago - Center for Study of Economy and State.
  13. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  14. N. Gregory Mankiw, 1994. "Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number greg94-1.
  15. Maria Arbatskaya & Michael R. Baye, 2004. "Are Prices ‘Sticky’ Online? Market Structure Effects and Asymmetric Responses to Cost Shocks in Online Mortgage Markets," Working Papers 2004-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  16. repec:dgr:rugccs:200503 is not listed on IDEAS
  17. Gual, Jordi & Neven, Damien J, 1992. "Deregulation of the European Banking Industry (1980-1991)," CEPR Discussion Papers 703, C.E.P.R. Discussion Papers.
  18. repec:dgr:rugccs:200106 is not listed on IDEAS
  19. Boris Hofmann & Paul Mizen, 2004. "Interest Rate Pass-Through and Monetary Transmission: Evidence from Individual Financial Institutions' Retail Rates," Economica, London School of Economics and Political Science, vol. 71, pages 99-123, 02.
  20. Ana-Maria Fuertes & Shelagh A. Heffernan, 2009. "Interest rate transmission in the UK: a comparative analysis across financial firms and products," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 45-63.
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