Housing Tenure and Mortgage Choice

Housing Tenure and Mortgage Choice This paper examines the relationship between housing tenure and mortgage contract. We present a model showing that, given expected mobility, borrowers will have incentive to self-select into the appropriate mortgage product such that their fixed-rate period is directly related to their probability of moving. We empirically test this hypothesis using housing tenure data derived from a large national database of repeat mortgage transactions. After controlling for borrower characteristics, the mobility hazards of 3/1, 5/1 and 7/1 ARMs, compared to a 30-year fixed rate, are estimated to be 28%, 14% and 11% higher, respectively http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

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Publisher
Springer Journals
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-009-9193-z
Publisher site
See Article on Publisher Site

Abstract

This paper examines the relationship between housing tenure and mortgage contract. We present a model showing that, given expected mobility, borrowers will have incentive to self-select into the appropriate mortgage product such that their fixed-rate period is directly related to their probability of moving. We empirically test this hypothesis using housing tenure data derived from a large national database of repeat mortgage transactions. After controlling for borrower characteristics, the mobility hazards of 3/1, 5/1 and 7/1 ARMs, compared to a 30-year fixed rate, are estimated to be 28%, 14% and 11% higher, respectively

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Jun 10, 2009

References

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