What Drives the Margins of Mortgage Loans?
26 Pages Posted: 19 Dec 2010
Date Written: September 1, 2010
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
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