Skip to main content

Racial Discrepancy in Mortgage Interest Rates


Existing research on racial discrimination in mortgage lending has overwhelmingly focused on whether black applicants are more likely to be denied for credit than comparable white applicants. This study investigates whether the approved black applicants are likely charged higher interest rates than their white counterparts. Using data from three waves of the U.S. Survey of Consumer Finance, our results suggest that black borrowers on average pay about 29 basis points more than comparable white borrowers. We also find that rate disparity mainly occurs to young borrowers with low education as well as those borrowers whose income and credit disqualify them for prime lending rates. Furthermore, among borrowers in the higher rate groups, black women seem to receive much more disparate treatment than black men. We conclude that, while the racial disparity in mortgage rates is widespread between black and white borrowers, it is the more financially vulnerable black women who suffer the most.

This is a preview of subscription content, access via your institution.


  1. 1.

    See report at:

  2. 2.

    See “Wells Fargo Will Settle Mortgage Bias Charges” by Charlie Savage, The New York Times, July 12, .


  1. Bayer, P., Ferreira, F. and Ross, S. (2013) “Race, Age and High Cost Mortgage Lending: Borrower Experiences Leading up to the Crisis,” University of Connecticut Working Paper

  2. Becker, G. (1993). Nobel Lecture: The Economic Way of Looking at Behavior. Journal of Political Economy, 101(3), 385–409.

    Article  Google Scholar 

  3. Belsley, D., Kuh, E., & Welsch, R. (1980). Regression Diagnostics: Identifying Influential Data and Sources of Collinearity. New York: John Wiley.

    Book  Google Scholar 

  4. Black, H., Schweitzer, R., & Mandell, L. (1978). Discrimination in Mortgage Lending. American Economic Review, 68(2), 186–191.

    Google Scholar 

  5. Black, H., Boehm, T., & DeGennaro, R. (2003). Is There Discrimination in Mortgage Pricing? The Case of Overages. Journal of Banking and Finance, 27, 1139–65.

    Article  Google Scholar 

  6. Bocian, D., Ernst, K., & Li, W. (2006). Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages. Durham, NC: Center for Responsible Lending.

    Google Scholar 

  7. Boehm, T., Thistle, P., & Schlottmann, A. (2006). Rates and Race: An Analysis of Racial Disparities in Mortgage Rates. Housing Policy Debate, 17, 109–149.

    Article  Google Scholar 

  8. Charles, K., Hurst, E., & Stephens, M. (2008). Rates for Vehicle Loans: Race and Loan Source (pp. 315–320). May, Papers and Proceedings: American Economic Review.

    Google Scholar 

  9. Cheng, P., Lin, Z., & Liu, Y. (2011). Do Women Pay More for Mortgages?”. Journal of Real Estate Finance and Economics, 43, 423–440.

    Article  Google Scholar 

  10. Clarke, J., Roy, N., & Courchane, M. (2009). On the Robustness of Racial Discrimination Findings in Mortgage Lending Studies. Applied Economics, 41, 2279–2297.

    Article  Google Scholar 

  11. Courchane, M., & Nickerson, D. (1997). Discrimination Resulting from Overage Practices. Journal of Financial Services Research, 11, 33–55.

    Article  Google Scholar 

  12. Crawford, G., & Rosenblatt, E. (1999). Differences in the Cost of Mortgage Credit: Implications for Discrimination. Journal of Real Estate Finance and Economics, 19, 147–59.

    Article  Google Scholar 

  13. Ferguson, M., & Peters, S. (1995). What Constitutes Evidence of Discrimination in Mortgage Lending?”. Journal of Finance, 50(2), 739–748.

    Article  Google Scholar 

  14. Ghent, A., Hernández-Murillo, R. and Owyang, M. (2011), “Race, Redlining and Subprime Mortgage Pricing,” St Louis Federal Reserve Working Paper

  15. Haughwout, A., Mayer, C. and Tracy, J. (2009), “Subprime Mortgage Pricing: The Impact of Race, Ethnicity and Gender on the Cost of Borrowing,” New York Federal Reserve Working Paper

  16. Holmes, A., & Horvitz, P. (1994). Mortgage Redlining: Race, Risk, and Demand. Journal of Finance, 49(1), 81–99.

    Article  Google Scholar 

  17. King, A. (1980). Mortgage Lending, Social Responsibility, and Public Policy: Some Perspectives on HMDA and CRA. Journal of the American Real Estate and Urban Economics Association, 8, 77–90.

    Article  Google Scholar 

  18. LaCour-Little, M. (1999). Discrimination in Mortgage Lending: A Critical Review of the Literature. Journal of Real Estate Literature, 7(1), 15–49.

    Article  Google Scholar 

  19. Ladd, H. (1998). “Evidence of Discrimination in Mortgage Lending,”. Journal of Economic Perspectives, 12(2), 41–62.

    Article  Google Scholar 

  20. Lusardi, A., & Mitchell, O. (2006). “Financial Literacy and Planning: Implications for Retirement Wellbeing”, Pension Research Council Working Paper WP2006–01.

    Google Scholar 

  21. Lusardi, A., & Mitchell, O. (2008). Planning and Financial Literacy: How Do Woman Fare?” (pp. 413–417). May, Papers and Proceedings: American Economic Review.

    Book  Google Scholar 

  22. Munnell, A., Tootell, G., Browne, L. and McEneaey, J. (1996), “Mortgage Lending in Boston: Interpreting HMDA Data,” American Economic Review, March 25-53.

  23. Ross, S. and Yinger, J. (1999), “Does Discrimination in Mortgage Lending Exist? The Boston Fed Study and Its Critics,” in Margery Austin Turner and Felicity Skidmore (Eds.), Mortgage Lending Discrimination: A Review of Existing Evidence (Washington, DC: The Urban Institute)

  24. Ross, S., & Yinger, J. (2002). The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair Lending Enforcement. Cambridge, MA: MIT Press.

    Google Scholar 

  25. Schafer, R., & Ladd, H. (1981). Discrimination in Mortgage Lending. In MIT-Harvard Joint Center for Urban Studies. Cambridge: MIT Press.

    Google Scholar 

  26. Susin, Scott (2003), “Mortgage Interest Rates and Refinancing: Racial and Ethnic Patterns”.Unpublished paper. U.S. Bureau of the Census.

  27. Turner, M. and Skidmore, F. (1999), “Mortgage Lending Discrimination: A Review of Existing Evidence,” The Urban Institute

  28. Yazer, A. (2006), “Discrimination in Mortgage Lending,” Chapter 12 of A Companion to Urban Economics edited by Arnott, R. And McMillen, D., Blackwell Publishing Ltd.

  29. Yinger, J. (1979). Prejudice and Discrimination in the Urban Housing Market. In P. Mieszkowski & M. Straszheim (Eds.), Current Issues in Urban Economics. Baltimore: John Hopkins Press.

    Google Scholar 

  30. Yinger, J. (1996). Discrimination in Mortgage Lending: A Literature Review. In M. Lending, R. Discrimination, & F. Policy (Eds.), John Goering and Ron Weink (pp. 29–74). Washington, DC: Urban Institute Press.

    Google Scholar 

Download references


We wish to thank Editor C.F. Sirmans at Journal of Real Estate Finance and Economics for his comments. We also want to thank an anonymous referee whose insightful comments and suggestions have helped us to improve the paper greatly. All errors remain our own.

Author information



Corresponding author

Correspondence to Zhenguo Lin.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Cheng, P., Lin, Z. & Liu, Y. Racial Discrepancy in Mortgage Interest Rates. J Real Estate Finan Econ 51, 101–120 (2015).

Download citation


  • Racial discrimination
  • Gender discrimination
  • Mortgage interest rate