This paper looks at the role mortgage brokers play in helping borrowers generate quotes and qualify for credit. We find that, on average, borrowers that engage with a mortgage broker pay lower interest rates. However, in about 15% of cases, borrowers are steered towards longer amortizing mortgages than they would have chosen absent a broker. Since mortgages with longer amortization have higher total interest costs over the entire life of the mortgage, this steering is expensive.
Staff working papers
During the COVID-19 pandemic, Canadian financial institutions offered debt-relief programs to help borrowers cope with job losses and economic insecurity. We consider the low take-up rates for these programs and suggest that to be effective, such programs must be visible and easy to use.
Bank resolution is costly. In the United States, the Federal Deposit Insurance Corporation (FDIC) typically resolves failing banks by auction.
This paper measures market power in a decentralized market where contracts are determined through a search and negotiation process. The mortgage industry has many institutional features which suggest competitiveness: homogeneous contracts, negotiable rates, and, for a given consumer, common lending costs across lenders.
Price Competition and Concentration in Search and Negotiation Markets: Evidence from Mortgage LendingThis paper examines the impact of bank consolidation on mortgage rates in order to evaluate the extent to which mortgage markets are competitive. Mortgage markets are decentralized and so rates are determined through a search and negotiation process.
This paper studies discounting in mortgage markets. Using transaction-level data on Canadian mortgages, we document that over time there's been an increase in the average discount, along with substantial dispersion.
This paper studies the role that market structure plays in affecting the diffusion of electronic banking. Electronic banking (and electronic commerce more generally) reduces the cost of performing many types of transactions for firms.