Mortgage product diversity: responding to consumer demand or protecting lender profit? An asymmetric panel analysis

Jeremy Nguyen, Abbas Valadkhani and Russell Smyth

Applied Economics, 2018, vol. 50, issue 43, 4694-4704

Abstract: This article explores determinants of mortgage product diversity for owner-occupied and investment loans in the Australian housing mortgage market. From 2001 to 2012, 65 lenders introduced 1220 mortgage products in Australia. We examine whether the product proliferation was a result of consumer demand or a response to pressure to lower lending rates. We find that consumer demand for mortgages does not have a significant relationship with the number of mortgage products, but that decreases in the policy interest rate are highly significant as an explanatory variable for product proliferation. Such behaviour is consistent with information obfuscation, reducing the ease with which consumers can compare lending rates. Further, the relationship between mortgage products offered and the policy interest rate is asymmetric: decreases in the cash rate are associated with increased mortgage products offered, but increases in the cash rate have a more muted effect on decreasing the number of products.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2018.1459038 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:50:y:2018:i:43:p:4694-4704

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2018.1459038

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().