Social proximity to capital and mortgage lending

This study investigates the impact of social proximity to capital on the U.S. mortgage markets. The results show that mortgage loans in counties with stronger social connectedness to capital are associated with significantly larger loan amounts and lower interest rates. The endogeneity concern is mitigated by employing a propensity score matched sample. Channel analysis reveals that the potential mechanisms operate through borrowers’ higher income and improved credit conditions. The cross-sectional analyses indicate that first-time homebuyers in counties with closer social proximity to capital secure larger loans and lower rates, whereas minorities in these areas face adverse outcomes.