Mortgage Rate and the Choice of Mortgage Length: Quasi-experimental Evidence from Chinese Transaction-level Data

Guoying Deng, Zhigang Li () and Guangliang Ye

No 1202, Working Papers from BBVA Bank, Economic Research Department

Abstract: Utilizing a large transaction-level dataset on housing mortgages in China, this study estimates the effect of the mortgage rate spread between long- and short-term loans on property purchasers choice of loan length. Our identification of the causal effect of this spread on loan length hinges on a unique institutional feature of China, that is, its dual-track mortgage scheme. We observe two types of mortgagors in this setting: normal mortgagors who face floating mortgage rates spread and special mortgagors who are entitled to a fixed mortgage rate spread. Using the latter as a comparison group to address the confounding effects of omitted factors, we find that the change in interest rates significantly affects the mortgage decisions of normal mortgagors. When the prime mortgage rate spread increases by 10 basis points, the likelihood of such a mortgagor choosing a shortterm loan increases by 8.4 percent.

Keywords: Mortgage rates; Loan decision; Quasi-experiment; China housing market (search for similar items in EconPapers)
JEL-codes: E58 R21 R28 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2012-01
New Economics Papers: this item is included in nep-ban and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Mortgage rate and choice of mortgage length: A quasi-experimental evidence from Chinese transaction-level data (2014)
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