Capital Requirements, Mortgage Rates and House Prices

50 Pages Posted: 20 Apr 2021 Last revised: 6 Jun 2022

Date Written: May 13, 2022


We study the effect of an increase in capital requirements for residential mortgages on mortgage rates and house prices. We exploit a unique quasi-experiment in which affected banks faced an increase in risk weights of five percentage points. Using a difference-in-differences estimator, we find that treated banks increase their mortgage rates by 19 basis points. Houses near affected banks have a 2.38% lower sale price after the increase in capital requirements. Our results imply a semi-elasticity of house prices to changes in mortgage rates of 12.3, in line with predictions from a user cost model.

Keywords: capital requirements, mortgage rates, house prices

JEL Classification: G28, R30

Suggested Citation

Damen, Sven and Schildermans, Stef, Capital Requirements, Mortgage Rates and House Prices (May 13, 2022). Available at SSRN: or

Sven Damen (Contact Author)

University of Antwerp ( email )

Prinsstraat 13
Antwerp, 2000


Stef Schildermans

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000

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