The Geography of Mortgage Lending in Times of FinTech

45 Pages Posted: 9 Aug 2019 Last revised: 21 Aug 2019

See all articles by Christoph Basten

Christoph Basten

University of Zurich; Swiss Finance Institute; CESifo (Center for Economic Studies and Ifo Institute)

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Date Written: August 9, 2019

Abstract

We analyze how banks’ allocations of mortgage credit across regions change when an online platform enables them to offer to regions where they have no branches, staff or legacy. Unique data from an online platform with offers from different banks to each mortgage application yield three novel findings. First, banks offer more and cheaper credit to borrowers in less competitive offline markets. Second, banks offer more credit to more distant locations, where house prices appear less over-heated, and past price growth is less correlated with that in their existing portfolio. Third, over time offers become more automated, lowering operational costs.

Keywords: Mortgage Lending, Spatial Competition, Credit Risk, Diversification, Automation of Banking, FinTech, Online Pricing

JEL Classification: G2, L1, R2

Suggested Citation

Basten, Christoph and Ongena, Steven R. G., The Geography of Mortgage Lending in Times of FinTech (August 9, 2019). Swiss Finance Institute Research Paper No. 19-39, August 2019. Available at SSRN: https://ssrn.com/abstract=3434966 or http://dx.doi.org/10.2139/ssrn.3434966

Christoph Basten (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute

c/o University of Geneva
40 Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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