Abstract

http://ssrn.com/abstract=1736208
 
 

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Why is the Market Share of Adjustable-Rate Mortgages so Low?


Emanuel Moench


Deutsche Bundesbank

James I. Vickery


Federal Reserve Bank of New York

David Aragon


affiliation not provided to SSRN

December 1, 2010

Current Issues in Economics and Finance, Vol. 16, No. 8, December 2010

Abstract:     
Over the past several years, U.S. homebuyers have increasingly favored fixed-rate mortgages over adjustable-rate mortgages (ARMs). Indeed, ARMs have dropped to less than 10 percent of all residential mortgage originations, a near-record low. One might speculate that the decline in the ARM share has been driven by "one-off" factors relating to the financial crisis. However, a statistical analysis suggests that recent trends can largely be explained by the same factors that have historically shaped mortgage choice - most notably, the term structure of interest rates and its effects on the relative price of different types of mortgages. Supply-side factors, in particular a rise in the share of mortgages eligible to be securitized by the housing government-sponsored enterprises, also play a role in the low current ARM share.

Number of Pages in PDF File: 11

Keywords: mortgage, fixed-rate mortgage, adjustable-rate mortgage

JEL Classification: G00, G11, G21


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Date posted: January 9, 2011  

Suggested Citation

Moench, Emanuel and Vickery, James I. and Aragon, David, Why is the Market Share of Adjustable-Rate Mortgages so Low? (December 1, 2010). Current Issues in Economics and Finance, Vol. 16, No. 8, December 2010. Available at SSRN: http://ssrn.com/abstract=1736208 or http://dx.doi.org/10.2139/ssrn.1736208

Contact Information

Emanuel Moench (Contact Author)
Deutsche Bundesbank ( email )
Wilhelm-Epstein-Str. 14
D-60431 Frankfurt/Main
Germany
+49 69 95662312 (Phone)
James Ian Vickery
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
David Aragon
affiliation not provided to SSRN ( email )
Feedback to SSRN


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