Age and interest rates: Evidence from home mortgages in Illinois

Using publicly available data from the Home Mortgage Disclosure Act, this study analyzes the relationship between age of the borrower and the interest rate paid on over two million loans in Illinois between 2018 and 2021. A hedonic price model is estimated using an econometric specification with fixed effects for age (in ten-year intervals), county, and other borrower or loan characteristics. Differences in estimates across age groups are interpreted as evidence of statistical discrimination. Additionally, a simple theoretical model is provided to explain why in equilibrium the relationship between age and interest rate may be positive, negative, or non-monotone. Lastly, estimates across urban and rural counties are compared to measure the interaction with age. The theoretical model sheds light on how to interpret urban versus rural differences.