The Geography of Mortgage Lending in Times of FinTech

Abstract

How does banks' geographical footprint change when a FinTech platform allows offering mortgages to regions without branch presence? Unique data on responses from different banks to each household yield three salient findings: First, banks offer 4% more often and 6 basis points cheaper when markets have high versus low concentration, implying more profitable follow-on business. Second, they offer 2% more often and 2 bps cheaper when unemployment or house price growth in the applicant's state are one standard deviation less correlated with those at home, improving portfolio diversification. Third, these offers are increasingly automated, using available hard information more efficiently.

Keywords: Banking Automation, Bartik instrument, Credit Risk Diversification, Fintech, Mortgage lending, Online Pricing, Pandemic, spatial competition

JEL Classification: G2, L1, R3