{"title":"Capital Requirements, Mortgage Rates and House Prices","authors":"S. Damen, Stef Schildermans","doi":"10.2139/ssrn.3829680","DOIUrl":null,"url":null,"abstract":"We study the effect of an increase in capital requirements for residential mortgages on mortgage rates and house prices. We exploit a unique quasi-experiment in which affected banks faced an increase in risk weights of five percentage points. Using a difference-in-difference estimator we find that treated banks increase their mortgage rates by 18 basis points. Houses near affected banks have a 2.34% lower sale price after the increase in capital requirements. Our results imply a semi-elasticity of house prices to changes in mortgage rates of 13, in line with predictions from a user cost model.","PeriodicalId":20999,"journal":{"name":"Regulation of Financial Institutions eJournal","volume":"89 10 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2021-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"2","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Regulation of Financial Institutions eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3829680","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 2
Abstract
We study the effect of an increase in capital requirements for residential mortgages on mortgage rates and house prices. We exploit a unique quasi-experiment in which affected banks faced an increase in risk weights of five percentage points. Using a difference-in-difference estimator we find that treated banks increase their mortgage rates by 18 basis points. Houses near affected banks have a 2.34% lower sale price after the increase in capital requirements. Our results imply a semi-elasticity of house prices to changes in mortgage rates of 13, in line with predictions from a user cost model.