# Does Banking Consolidation Harm Households? 

Bank mergers generally do not raise mortgage rates, reduce mortgage approvals, or increase late payments, likely because local mortgage markets remain highly competitive.

September 9, 2026 • Research Briefs in Economic Policy No. 500 

By Celso Brunetti, Jeffrey H. Harris, and Ioannis Spyridopoulos 

In the United States, the number of banks and similar institutions declined by nearly 70 percent between 1985 and 2020, falling from 14,417 to 4,379. Banking assets have also become more concentrated: Over the same period, the number of banks controlling half of all banking assets fell from 91 to only 10. These changes have raised concerns that bank mergers reduce competition, increase borrowing costs, and limit households’ access to credit.

These concerns are especially important in the mortgage market, as mortgages account for more than two-thirds of American household debt. If mergers grant banks greater control over local lending markets, banks may be able to charge higher interest rates or otherwise make it more difficult for households to obtain mortgages.

Our research examines whether bank mergers have harmed mortgage borrowers. We combined information on nearly 5,000 bank mergers with confidential data covering approximately 44 million US mortgages issued between 1994 and 2023. We compared mortgage outcomes at merged banks with outcomes at other lenders operating in the same county. We examined how these outcomes changed after each merger while accounting for differences between borrowers, loans, banks, and local economies. This approach allowed us to isolate changes related to mergers from broader shifts in housing markets or the economy.

Our findings reveal that bank mergers do not harm mortgage borrowers. Mergers have no meaningful effect on interest rates, approval rates, or late payments. Merged banks do not appear to use their increased size to charge borrowers more or restrict access to mortgages. While comparing average interest rates before and after mergers suggests that rates increased in some cases, these changes generally reflect differences between the merged banks’ customers and loans rather than new pricing decisions. For example, if a large bank offering relatively low rates acquires a community bank whose customers pay higher rates, the acquiring bank’s average rate may rise even if it does not change the rates offered to either group. When we account for these differences, the apparent rate increases disappear.

The absence of harmful effects on borrowers may reflect the intense competition in local mortgage markets. The typical county has more than 130 active mortgage lenders per quarter, and the median lender controls just 0.4 percent of its local market. Therefore, even when two banks merge, borrowers generally continue to have many other lending options.

In some cases, local competition actually increases after mergers. When large banks acquire community banks, the number of active lenders in affected counties rises from about 150 to 185, and mortgage-market concentration declines. These mergers tend to occur in expanding markets, where the entry of other lenders more than offsets the consolidation caused by the merger. These findings undercut the view that mergers allow banks to eliminate competitors and gain greater control over mortgage markets.

Our findings also suggest that banks pursue mergers for various reasons. Community banks acquired by large institutions become more profitable, issue more mortgages per employee, and retain 41 percent of their mortgages rather than selling them to outside investors. This is roughly 10 times the share retained by community banks that merge with each other. Large banks may acquire these institutions to gain access to their customer relationships and local lending expertise. By contrast, community banks that merge with other community banks may seek the greater size and resources needed to compete.

Several limitations of our study are worth noting. We examined only mergers completed after regulatory review, so our findings do not suggest that every proposed merger would have been harmless. Regulators may have prevented mergers that posed the greatest risks to competition. Furthermore, our analysis focuses on mortgages, but mergers could affect households through branch closures or changes in checking-account fees, interest on deposits, customer service, credit cards, or other types of loans.

Stable rates do not leave borrowers worse off, nor do they show that any cost savings from mergers reach households, though this question deserves a separate study. Ultimately, our findings suggest that regulators should examine how proposed mergers would likely affect specific financial products and local markets. The declining number of banks does not by itself indicate that households will suffer. In the mortgage market, bank mergers do not generally increase interest rates or reduce access to credit for American households.

**Note** 
This research brief is based on Celso Brunetti et al., “[Does Banking Consolidation Harm Households?](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6851099),” Finance and Economics Discussion Series Working Paper no. 2026–27, Board of Governors of the Federal Reserve System, May 2026. The views expressed here are those of the authors and do not necessarily reflect the views of the Board of Governors of the Federal Reserve System or of anyone else associated with the Federal Reserve System.

##### About the Authors 

##### Celso Brunetti 

Federal Reserve Board

##### Jeffrey H. Harris 

American University

##### Ioannis Spyridopoulos 

American University

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