A new study shows digital mortgages reduces instances of discriminatory practices against blacks and Latinos. Both groups also see lower interest rates vs. traditional mortgages.
Forbes reports, “Consumer-lending Discrimination in the FinTech Era,” a study from the National Bureau of Economic Research, has found a link between the number of growing digital mortgage offerings and reduced discrimination in the lending industry. According to the findings, black and Latino homebuyers currently see an interest rate that’s 0.79% higher on average than other borrowers. It’s a big difference, but it’s one that has shrunk significantly in recent years. In 2009, Latinx and black borrowers saw rates nearly 1.25% higher than other borrowers.
Forbes also says the study finds that algorithmic lending reduces discrimination by 40% when compared to face-to-face lending options. It also encourages borrowers to shop around more and increases competition among lenders.
Additionally, algorithmic lending also removes discrimination in accept-or-reject decisions on mortgage lending, according to the study. Black and Latinx borrowers are rejected 6% more than non-minority ones, even with the same financial profiles.
To learn more about the effects of digital mortgages on discrimination, click on the photo above.