Cost of Credit, Mortgage Demand and House Prices

43 Pages Posted: 22 Mar 2021 Last revised: 6 Jul 2021

See all articles by Yusuf Emre Akgunduz

Yusuf Emre Akgunduz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Özlem Dursun-de Neef

Goethe University Frankfurt

Yavuz Hacihasanoglu

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Fatih Yilmaz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Date Written: March 12, 2021

Abstract

This paper studies the relationship between mortgage rates and house prices. We exploit a sudden reduction in mortgage rates of state-owned banks in Turkey during the summer of 2020 as an exogenous shock to provide causal estimates of a decrease in the cost of credit on mortgage demand and house prices. The effects are estimated using a detailed dataset on all house sales with mortgages. We find that a 1 percentage point decrease in annual mortgage rates led to an increase in individual mortgage loans by 6.6% and an increase in house prices by 3.2%.

Keywords: Mortgage rates; Mortgage lending; House prices

JEL Classification: G21, G28

Suggested Citation

Akgunduz, Yusuf Emre and Dursun-de Neef, H. Özlem and Hacihasanoglu, Yavuz and Yilmaz, Fatih, Cost of Credit, Mortgage Demand and House Prices (March 12, 2021). Available at SSRN: https://ssrn.com/abstract=3803383 or http://dx.doi.org/10.2139/ssrn.3803383

Yusuf Emre Akgunduz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

H. Özlem Dursun-de Neef (Contact Author)

Goethe University Frankfurt ( email )

House of Finance, Campus Westend
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Frankfurt am Main 60629
Germany

HOME PAGE: http://sites.google.com/site/oezlemdursundeneef/

Yavuz Hacihasanoglu

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

Fatih Yilmaz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

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