Racial Discrepancy in Mortgage Interest Rates

Posted: 28 May 2015

See all articles by Ping Cheng

Ping Cheng

Florida Atlantic University - Finance

Zhenguo (Len) Lin

Florida International University (FIU) - Hollo School of Real Estate

Yingchun Liu

Dept. of Finance, Insurance, Real Estate and Law, University of North Texas

Multiple version iconThere are 2 versions of this paper

Date Written: May 27, 2015

Abstract

Existing research on racial discrimination in mortgage lending has overwhelmingly focused on whether black applicants are more likely to be denied for credit than comparable white applicants. This study investigates whether the approved black applicants are likely charged higher interest rates than their white counterparts. Using data from three waves of the U.S. Survey of Consumer Finance, our results suggest that black borrowers on average pay about 29 basis points more than comparable white borrowers. We also find that rate disparity mainly occurs to young borrowers with low education as well as those borrowers whose income and credit disqualify them for prime lending rates. Furthermore, among borrowers in the higher rate groups, black women seem to receive much more disparate treatment than black men. We conclude that, while the racial disparity in mortgage rates is widespread between black and white borrowers, it is the more financially vulnerable black women who suffer the most.

Keywords: Racial discrimination; Gender discrimination; Mortgage interest rate

Suggested Citation

Cheng, Ping and Lin, Zhenguo and Liu, Yingchun, Racial Discrepancy in Mortgage Interest Rates (May 27, 2015). Journal of Real Estate Finance and Economics, Vol. 51, No. 1, 2015. Available at SSRN: https://ssrn.com/abstract=2611316

Ping Cheng

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States
561-297-3456 (Phone)
561-297-3686 (Fax)

Zhenguo Lin (Contact Author)

Florida International University (FIU) - Hollo School of Real Estate ( email )

Miami, FL 33199
United States
3057799248 (Phone)

Yingchun Liu

Dept. of Finance, Insurance, Real Estate and Law, University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States

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