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

  • Diaz-Serrano, Luis

    ()

    (Universitat Rovira i Virgili)

  • Raya, Josep M.

    ()

    (Universitat Pompeu Fabra)

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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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: published as 'Mortgages, immigrants and discrimination: An analysis of the interest rates in Spain' in: Regional Science & Urban Economics, 2014, 45, 22-32
Handle: RePEc:iza:izadps:dp5578
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References listed on IDEAS
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  1. 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.
  2. 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.
  3. 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.
  4. Alicia H. Munnell, 1992. "Mortgage lending in Boston: interpreting HMDA data," Working Papers 92-7, Federal Reserve Bank of Boston.
  5. Hunter, William C & Walker, Mary Beth, 1996. "The Cultural Affinity Hypothesis and Mortgage Lending Decisions," The Journal of Real Estate Finance and Economics, Springer, vol. 13(1), pages 57-70, July.
  6. 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.
  7. Marsha Courchane & David Nickerson, 1997. "Discrimination Resulting from Overage Practices," Journal of Financial Services Research, Springer, vol. 11(1), pages 133-151, February.
  8. William C. Hunter & Mary Beth Walker, 1995. "The cultural affinity hypothesis and mortgage lending decisions," Working Paper Series, Issues in Financial Regulation 95-8, Federal Reserve Bank of Chicago.
  9. Glenn B. Canner & Dolores S. Smith, 1991. "Home Mortgage Disclosure Act: expanded data on residential lending," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 859-881.
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