In new research examining 44 million U.S. mortgages and nearly 5,000 bank mergers over three decades, Celso Brunetti, Jeffrey H. Harris, and Ioannis Spyridopoulos find that bank consolidation does not raise mortgage rates, restrict credit access, or degrade loan quality. Local mortgage markets remain intensely competitive.
The United States has lost almost 70 percent of its banks since the mid-1980s. The number of active banks and thrifts (e.g., savings and loan associations) fell from 14,417 to 4,379 between 1985 and 2020. Meanwhile, as an indication of concentration in the banking market, the number of banks controlling half of all U.S. banking assets fell from 91 institutions to just 10 over the same 35-year period. Yet this extensive consolidation has not made mortgages more expensive or harder to get. That is the central finding of our new research, which tracks 44 million U.S. mortgages against nearly 5,000 bank mergers over almost thirty years. After banks merge, mortgage rates do not rise, approval rates do not fall, and the loans banks originate do not perform any worse. The reason is simple but underappreciated: despite consolidation at the national level, the local markets where households actually shop for mortgages remain crowded with competitors.
Our findings speak directly to one of the most active fronts in antitrust policy today. Policymakers have responded to the wave of banking consolidation with intensified scrutiny—the proposed Bank Merger Review Modernization Act would tighten review of mergers’ competitive effects, and the Federal Deposit Insurance Corporation has solicited comment on whether the 1960 Bank Merger Act remains fit for purpose. The concern is intuitive: fewer banks should mean less competition, more pricing power, and worse deals for consumers. And nowhere would that harm matter more than in mortgage lending, which accounts for more than two-thirds of American household debt.
Intuitive, but in the mortgage market, the data show otherwise.
What 44 million mortgages reveal
Measuring whether mergers harm borrowers is harder than it sounds. Comparing average mortgage rates for the acquiring bank before and after a merger can badly mislead, because a merger mechanically combines two loan portfolios. Suppose a large bank originating 1,000 mortgages per quarter at competitive rates acquires a community bank originating 100 mortgages per quarter at rates 25 basis points higher. Even if neither institution changes its pricing at all, the merged bank’s average rate rises. A naive before-and-after comparison would read this increase as market power.
Our data let us see through this problem. We combine confidential loan-level records from the Home Mortgage Disclosure Act—covering virtually every mortgage application in the U.S.—with servicing data that tracks each loan’s interest rate, contract terms, and repayment history from origination to resolution. The result is a dataset of 44 million mortgages spanning 1994 to 2023, linked to data on roughly 5,000 bank mergers drawn from Federal Reserve regulatory filings. For each merger, we compare the merging banks to other lenders operating in the same counties at the same time, before and after the deal, to control for housing and credit conditions, while holding fixed borrower characteristics such as credit scores, incomes, and loan-to-value ratios.
The results are consistent across every dimension we examine. Mortgage rates charged by acquiring banks do not rise relative to competitors in the same county—not when community banks merge, not when large banks absorb community banks, and not when large banks combine with one another. Approval rates do not fall. Delinquency rates on newly originated loans do not change, indicating that merged banks neither tighten standards to ration credit nor loosen them recklessly. Lender fees show no significant movement either. The simple before-and-after rate increases that appear in raw averages, particularly when large banks acquire higher-priced community banks, vanish once we account for the mechanical portfolio-mixing effect. Acquiring banks keep pricing as they did before the merger.
The competition hiding in plain sight
Why doesn’t consolidation translate into pricing power? Because local mortgage markets are far more competitive than the national consolidation numbers suggest, even after the wave of mergers. The average mortgage borrower in our sample faces a county market with more than 130 active lenders, including banks and the non-bank mortgage companies that compete vigorously alongside them. The median lender holds just 0.4 percent of its county market. Measured by the Herfindahl-Hirschman Index, the standard antitrust concentration gauge, the typical county sits far below the 1,000-point threshold regulators have long used as the floor for even a moderately concentrated market.
More striking still, competition often intensifies around mergers. When large banks acquire community banks, the number of active lenders in affected counties rises from roughly 150 to 185 over the following two years, and local concentration falls by about 10 to 15 percent. Mergers tend to happen in growing markets that are simultaneously attracting new entrants, and that entry swamps whatever concentration the merger creates. A merged bank contemplating a rate increase faces dozens of rivals ready to take its customers.
Why banks really merge
If not to gain market power, why do banks merge? The pre-merger characteristics of acquirers and targets tell a coherent story about selection, and it differs sharply by merger type.
When community banks buy other community banks—the most common deal, comprising 55 percent of our sample—they acquire visibly struggling peers: targets with near-zero profitability and expense ratios consuming 90 percent of income. These mergers look like a survival mechanism, smaller institutions combining to gain the scale needed to compete with larger rivals.
When large banks buy community banks, they select a very different kind of target: profitable, efficient, relationship-intensive lenders. The most telling statistic is portfolio retention. Community banks acquired by large institutions keep 41 percent of their mortgages on their own balance sheets rather than selling or securitizing them, more than ten times the 4 percent rate of community banks acquired by their peers. That retention pattern marks them as classic relationship lenders with established local customer bases. Large acquirers bring what these targets lack: scale, cheaper funding, and securitization infrastructure. The pattern points to efficiency and complementarity, not the elimination of rivals.
What this means for merger policy
Our findings counsel against presuming that bank consolidation harms household borrowers, but two caveats matter for how the evidence should be used.
First, we study completed mergers—deals that survived regulatory review. Our results do not tell us what effects an unreviewed merger would have, and they are consistent with the possibility that the existing review process screens out the problematic deals.
Second, the absence of harm is not proof of shared benefit. Stable rates mean borrowers are not worse off, but they also mean that whatever cost savings mergers generate are not visibly passed through as cheaper credit. Merged banks may simply be retaining efficiency gains, a form of rent retention that is economically distinct from market power but still relevant to a full welfare accounting.
Still, the policy debate should start from an accurate picture of the marketplace. For U.S. mortgages, that picture features over 100 lenders in the typical county, a median lender holding less than half a percent of its market, and concentration levels that fall—not rise—around merger events. Merger review that focuses on national bank counts or deposit concentration risks fighting a problem that, in this market at least, the data cannot find. Households borrowing to buy a home face a marketplace that remains, by any standard antitrust measure, robustly competitive.
Authors’ Note: The views expressed here are solely the authors’ and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System. The authors report no outside funding for this research.
Authors’ Disclosures: The authors report no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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