Mortgage pricing and monetary policy

Matteo Benetton, Alessandro Gavazza and Paolo Surico

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper examines how central bank policies influence mortgage pricing in the United Kingdom. It shows that lenders price discriminate by offering two-part tariffs of interest rates and origination fees, and during unconventional monetary policies like the Funding for Lending Scheme, lenders reduced interest rates while increasing fees. Using a model of mortgage demand and lender competition, we find that central bank policies increased mortgage lending. Additionally, banning origination fees would reduce lending, as fees help lenders capture surplus while allowing them to price discriminate across borrowers with different sensitivities to rates and fees.

JEL-codes: E43 E52 E58 G21 G28 R31 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2025-03-10
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Published in American Economic Review, 10, March, 2025, 115(3), pp. 823 - 863. ISSN: 0002-8282

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http://eprints.lse.ac.uk/126188/ Open access version. (application/pdf)

Related works:
Journal Article: Mortgage Pricing and Monetary Policy (2025)
Working Paper: Mortgage pricing and monetary policy (2021)
Working Paper: Mortgage Pricing and Monetary Policy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:126188

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