What Drives the Margins of Mortgage Loans?

26 Pages Posted: 19 Dec 2010

See all articles by Andreas Dietrich

Andreas Dietrich

Lucerne University of Applied Sciences and Arts

Christian Wunderlin

Lucerne University of Applied Sciences and Arts

Date Written: September 1, 2010

Abstract

This paper empirically examines the determinants of margins for a unique dataset of 8,120 mortgage loans with fixed interest rates of a medium-sized Swiss bank over the period from 2000 to 2009. Our margin determinants include loan-specific factors, as well as external and bank-specific characteristics, some of which have not been considered in previous studies. Our results reveal that loan-specific factors explain a substantial part of our dependent variable. Furthermore, external factors such as GDP growth and inflation also significantly affect mortgage loan margins. The declining mortgage loan margins can be further explained by means of increasing operational efficiency and a growth strategy of the bank.

Keywords: Bank, Net-Interest Margin, Mortgage Loans, Market Structure

JEL Classification: G21, E43

Suggested Citation

Dietrich, Andreas and Wunderlin, Christian, What Drives the Margins of Mortgage Loans? (September 1, 2010). Available at SSRN: https://ssrn.com/abstract=1728205 or http://dx.doi.org/10.2139/ssrn.1728205

Andreas Dietrich (Contact Author)

Lucerne University of Applied Sciences and Arts ( email )

IFZ Institute of Financial Services Zug
P.O. Box 4332
Zug, CH-6304
Switzerland

Christian Wunderlin

Lucerne University of Applied Sciences and Arts ( email )

IFZ Institute of Financial Services Zug
P.O. Box 4332
Zug, CH-6304
Switzerland

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