Mortgages, immigrants and discrimination: An analysis of the interest rates in Spain

• There is evidence of mortgage price differentials between immigrants and natives.
• Observables explain little of the immigrant-native price gap in mortgages.
• Some traces of discrimination between immigrants and natives can be inferred.

In this paper, we use a unique data set on granted mortgages to investigate whether immigrant and native borrowers are treated differently by lenders in the Spanish mortgage market. We observe that immigrant borrowers are charged substantially higher interest rates in their mortgages than their native counterparts. These differentials remain high and significant even after controlling for differences in creditworthiness and other factors. Further analyses based on the decomposition of the native–immigrant interest rate gap reveal that the differences in observable factors only account for 12% of the gap. The empirical evidence we find here suggests that these differentials are due to discrimination.