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Does lender type matter for the pricing of loans?

Aniruddha Rajan () and Matthew Willison
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Aniruddha Rajan: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 767, Bank of England working papers from Bank of England

Abstract: Loan markets often contain lenders with contrasting business models and ownership structures. But does that matter for outcomes in these markets? We examine whether it does using a loan-level data set of mortgage transactions in the United Kingdom. We find the type of lender can matter for pricing behaviour. The levels of interest rates, as well as the sensitivity of rates to funding costs and borrower risk, vary between lender types. Some of these differences are consistent with theories of how agency problems might vary between types of lenders and past empirical studies. But other differences are not consistent. The results suggest further research is needed to understand how, to what extent, and why lender types affect pricing in loan markets.

Keywords: Banking; lending; business models; mutuals (search for similar items in EconPapers)
JEL-codes: G21 G30 L21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-cfn
Date: 2018-11-16
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0767

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