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Cost of credit, mortgage demand and house prices

Author

Listed:
  • Akgündüz, Yusuf Emre
  • Dursun-de Neef, H. Özlem
  • Hacihasanoğlu, Yavuz Selim
  • Yılmaz, Fatih

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%.

Suggested Citation

  • Akgündüz, Yusuf Emre & Dursun-de Neef, H. Özlem & Hacihasanoğlu, Yavuz Selim & Yılmaz, Fatih, 2023. "Cost of credit, mortgage demand and house prices," Journal of Banking & Finance, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:jbfina:v:154:y:2023:i:c:s0378426623001589
    DOI: 10.1016/j.jbankfin.2023.106953
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    More about this item

    Keywords

    Mortgage rates; Mortgage lending; House prices;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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