Price-settings and Price Dispersion in the Dutch Mortgage Market
Abstract We analyse empirically price-setting in the Dutch mortgage market, using information on about 124,000 Dutch households and 54 mortgage lenders over the years 1996-2001. For a narrowly defined set of mortgages (which have a fixed lending rate for ten years), the range of the lending rate between lenders varies between 0.86 and 1.24 percentage points over these years. Prices remain dispersed across lenders, even after controlling for the characteristics of the household and the municipality (1 percentage point). We find that the price dispersion of mortgages sold by banks is smaller than that of mortgages sold by life insurers (0.60 versus 1.28 percentage points). This difference may be due to lower agency costs for banks than for life insurers. Another likely explanation is that the market segment for banks is more transparent than that of insurance companies. This may imply that there is imperfect competition among lenders, so that some of them can develop market power. Furthermore, we find indications for market power since lenders with higher costs have higher lending rates, accounting for a maximum change of the lending rate by 0.076 â€“ 0.16 percentage point. Keywords: Mortgage market; Price dispersion; Agency costs; Search costs; Lender-borrower matched data
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +31 30 253 9800
Fax: +31 30 253 7373
Web page: http://www.uu.nl/EN/faculties/leg/organisation/schools/schoolofeconomicsuse/Pages/default.aspx
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steven Salop & Joseph Stiglitz, 1977.
"Bargains and ripoffs: a model of monopolistically competitive price dispersion,"
Special Studies Papers
94, Board of Governors of the Federal Reserve System (U.S.).
- Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 493-510, October.
- Gary-Bobo, Robert J. & Larribeau, Sophie, 2002.
"A Structural Econometric Model of Price Discrimination in the Mortgage Lending Industry,"
CEPR Discussion Papers
3302, C.E.P.R. Discussion Papers.
- Robert Gary-Bobo & Sophie Larribeau, 2002. "A Structural Econometric Model of Price Discrimination in the Mortgage Lending Industry," CESifo Working Paper Series 739, CESifo Group Munich.
- Fase, M. M. G., 1995. "The demand for commercial bank loans and the lending rate," European Economic Review, Elsevier, vol. 39(1), pages 99-115, January.
- Crawford, Gordon W & Rosenblatt, Eric, 1999. "Differences in the Cost of Mortgage Credit Implications for Discrimination," The Journal of Real Estate Finance and Economics, Springer, vol. 19(2), pages 147-59, September.
- Chiang, Raymond C & Chow, Ying-Foon & Liu, Ming, 2002. "Residential Mortgage Lending and Borrower Risk: The Relationship between Mortgage Spreads and Individual Characteristics," The Journal of Real Estate Finance and Economics, Springer, vol. 25(1), pages 5-32, July.
- Toolsema, Linda A. & Jacobs, Jan, 2001. "Why do prices rise faster than they fall? : with an application to mortgage rates," CCSO Working Papers 200106, University of Groningen, CCSO Centre for Economic Research.
- Toolsema, Linda A., 2002. "Competition in the Dutch consumer credit market," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2215-2229, November.
- Duca, John V & Rosenthal, Stuart S, 1994. "Do Mortgage Rates Vary Based on Household Default Characteristics? Evidence on Rate Sorting and Credit Rationing," The Journal of Real Estate Finance and Economics, Springer, vol. 8(2), pages 99-113, March.
- 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.
- Leonard Laudadio, 1987. "Commercial Banks: Market Structure and Short-Term Interest Rates," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 9(4), pages 632-641, July.
- Nothaft, Frank E. & Perry, Vanessa G., 2002. "Do mortgage rates vary by neighborhood? Implications for loan pricing and redlining," Journal of Housing Economics, Elsevier, vol. 11(3), pages 244-265, September.
- Angrist, Joshua D & Krueger, Alan B, 1991.
"Does Compulsory School Attendance Affect Schooling and Earnings?,"
The Quarterly Journal of Economics,
MIT Press, vol. 106(4), pages 979-1014, November.
- Joshua D. Angrist & Alan B. Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," NBER Working Papers 3572, National Bureau of Economic Research, Inc.
- Joshua Angrist & Alan Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," Working Papers 653, Princeton University, Department of Economics, Industrial Relations Section..
- Gropp, Reint & Scholz, John Karl & White, Michelle J, 1997.
"Personal Bankruptcy and Credit Supply and Demand,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(1), pages 217-51, February.
- Harry E. Merriken, 1988. "Mortgage Loan Market Segmentation and Lender Pricing Behavior," Journal of Real Estate Research, American Real Estate Society, vol. 3(1), pages 9-18.
- de Bondt, Gabe, 2002. "Retail bank interest rate pass-through: new evidence at the euro area level," Working Paper Series 0136, European Central Bank.
- Richard L. Haney, Jr., 1988. "Sticky Mortgage Rates: Some Empirical Evidence," Journal of Real Estate Research, American Real Estate Society, vol. 3(1), pages 61-73.
When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:0307. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marina Muilwijk)
If references are entirely missing, you can add them using this form.