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Competition and interest rates in the Dutch mortgage market: an econometric analysis over 2004-2010

Author

Listed:
  • Machiel Mulder
  • Mark Lengton

    (Netherlands Competition Authority)

Abstract

Triggered by evidence that the mortgage interest margins have risen since 2009, an econometric analysis is conducted to explain the interest rates in the Dutch mortgage market at the bank level ver 2004 – 2010. Controlling for the influence of costs, risks and also for some regulatory measures, we find statistically significant evidence that the degree of competition in the Dutch mortgage market (measured by C3 or HHI) affected the level of the mortgage interest rates. An increase in market concentration equal to the size of its standard deviation over the period of analysis raised the mortgage interest rate by approximately 0.10 to 0.20 percentage points. The impact of costs as well as risks appears to be about twice as large as the impact of market concentration.

Suggested Citation

  • Machiel Mulder & Mark Lengton, 2011. "Competition and interest rates in the Dutch mortgage market: an econometric analysis over 2004-2010," NMa Working Papers 5, Netherlands Competition Authority.
    • Handle: RePEc:nco:wpaper:1114
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    References listed on IDEAS

    as
    1. Carbó, Santiago & Humphrey, David & Maudos, Joaquín & Molyneux, Philip, 2009. "Cross-country comparisons of competition and pricing power in European banking," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 115-134, February.
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    More about this item

    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
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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