Bank-specific daily interest rate adjustment in the Dutch mortgage market

Leo de Haan*, Elmer Sterken

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

This paper presents an empirical analysis of the interest rate setting behavior of the four largest banks in the Dutch mortgage market, using advertised interest rates at a daily frequency. The evidence for the long run pricing behaviour suggests that the banks operate in a competitive environment as they base their interest rates on funding cost. However, two banks appear to be less cost sensitive than the others. In the short run, most of the banks adjust their rates less strongly to funding cost increases than to decreases, which suggests competitive pressures. For one bank significant evidence is found for a quicker response to negative than to positive deviations of actual from desired interest rates.

Original languageEnglish
Pages (from-to)145-159
Number of pages15
JournalJournal of Financial Services Research
Volume39
Issue number3
DOIs
Publication statusPublished - Jun-2011

Keywords

  • Asymmetric pricing
  • Mortgage loans
  • Error Correction Model
  • NUMERICAL DISTRIBUTION-FUNCTIONS
  • COINTEGRATION
  • TRANSMISSION
  • COMPETITION
  • TESTS

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