Cost of Credit and House Prices

Yusuf Emre Akgunduz, H. Ozlem Dursun-de Neef, Yavuz Selim Hacihasanoglu and Fatih Yilmaz

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This paper studies the relationship between house prices and financing conditions. In the analysis, it exploits a sudden reduction in the mortgage rates of state-owned banks in Turkey during the summer of 2020 as an exogenous shock to provide causal estimates of the cost of credit on house prices. The effects are estimated using a detailed dataset on all house sales with mortgages. Our results show that a 1 percentage point decrease in annual interest rates raised house prices by 2.1%. This impact is driven by a corresponding increase in individual mortgage loans of 6.6%.

Keywords: Mortgage rates; Mortgage lending; House prices (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:2106

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