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Mortgage rates, origination fees, and the transmission of monetary policy

September 9, 2021

In the aftermath of the 2007–09 financial crisis, central banks around the world have sought to stimulate the economy through new policies specifically designed to revamp credit and housing markets. These policies include the US Federal Reserve’s QE1 and QE3, the ECB’s Targeted Longer-Term Refinancing Operations, and the Bank of England’s Funding for Lending Scheme, among others. 
A main goal of these unconventional policies was to make it cheaper for lenders to access funds and, in turn, “to enhance the functioning of the monetary policy transmission mechanism by supporting lending to the real economy”.1
Stimulating lending activities can be a powerful way to support the housing sector and foster consumer spending. However, the literature has identified several frictions in the

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