Cost of credit, mortgage demand and house prices

Yusuf Emre Akgunduz, H. Özlem Dursun-de Neef, Yavuz Selim Hacihasanoğlu and Fatih Yilmaz

Journal of Banking & Finance, 2023, vol. 154, issue C

Abstract: This paper studies the relationship between mortgage rates and house prices. We exploit a subsidized mortgage program that reduced the mortgage rates of state-owned banks in Turkey during the summer of 2020 as an exogenous shock to provide causal estimates of a decrease in the cost of credit on mortgage demand and house prices. The effects are estimated using a detailed dataset on all house sales with mortgages. We find that a 1 percentage point decrease in annual mortgage rates led to an increase in individual mortgage loans by 3.3% and an increase in house prices by 1.6%.

Keywords: Mortgage rates; Mortgage lending; House prices (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:154:y:2023:i:c:s0378426623001589

DOI: 10.1016/j.jbankfin.2023.106953

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