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In this paper we study the impact of the degree of concentration of a financial system on the aggregate demand for housing as well as the feedback effect of the size of the mortgage loan market on lenders' profits, internal capital accumulation, loan losses and potential bailouts. In a general equilibrium framework with endogenous borrowing constraints, we show that, contrary to the traditional view, competitive lenders can generate larger profits and accumulate more internal capital thandoi:10.2139/ssrn.1701221 fatcat:mxijhr4pzbgfdl5yoj7w27oyw4