This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Choice of mortgage contracts: evidence from the Survey of Consumer Finances

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Brahima Coulibaly
Geng Li

Additional information is available for the following registered author(s):

Abstract

This study revisits the empirical question of the determinants of the choice between fixed and adjustable-rate mortgages using more comprehensive data from the Survey of Consumer Finances (SCF) that overcome some of the data limitations in previous studies. The results from a Logit model of mortgage choice indicate that pricing variables and affordability are important considerations. We also find that factors such as mobility expectations, income volatility, and attitudes toward financial risk largely influence mortgage choice, with more risk-averse borrowers preferring fixed-rate mortgages. For households that are less risk averse, the mortgage type choice decision is less sensitive to pricing variables and income volatility, and affordability factors are not significant. These findings provide empirical support that underscore the importance of attitudes toward risks in mortgage choice.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.federalreserve.gov/pubs/feds/2007/200750/200750abs.html
File Format: text/html
File Function:
Download Restriction: no
File URL: http://www.federalreserve.gov/pubs/feds/2007/200750/200750pap.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2007-50.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:fip:fedgfe:2007-50

Contact details of provider:
Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551
Web page: http://www.federalreserve.gov/
More information through EDIRC

Order Information:
Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html

For technical questions regarding this item, or to correct its listing, contact: (Diane Rosenberger).

Related research
Keywords: Mortgage loans ; Consumer behavior;

Other versions of this item:

This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. John Y. Campbell & Joao F. Cocco, 2003. "Household Risk Management and Optimal Mortgage Choice," NBER Working Papers 9759, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  4. Nothaft, Frank E & Wang, George H K, 1992. "Determinants of the ARM Share of National and Regional Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 5(2), pages 219-34, June.
  5. Brueckner, Jan K & Follain, James R, 1988. "The Rise and Fall of the ARM: An Econometric Analysis of Mortgage Choice," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 93-102, February. [Downloadable!] (restricted)
  6. Brian Bucks & Karen Pence, 2006. "Do homeowners know their house values and mortgage terms?," Finance and Economics Discussion Series 2006-03, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  7. Alm, James & Follain, James R., 1984. "Alternative Mortgage Instruments, the Tilt Problem, and Consumer Welfare," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(01), pages 113-126, March. [Downloadable!]
  8. Baesel, Jerome B. & Biger, Nahum, 1980. "The Allocation of Risk: Some Implications of Fixed versus Index-Linked Mortgages," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(02), pages 457-468, June. [Downloadable!]
  9. Stanton, Richard & Wallace, Nancy, 1999. "Anatomy of an ARM: The Interest-Rate Risk of Adjustable-Rate Mortgages," The Journal of Real Estate Finance and Economics, Springer, vol. 19(1), pages 49-67, July. [Downloadable!] (restricted)
  10. Sa-Aadu, J & Sirmans, C F, 1995. "Differentiated Contracts, Heterogeneous Borrowers, and the Mortgage Choice Decision," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 498-510, May. [Downloadable!] (restricted)
  11. Donald J. Smith, 1987. "The Borrower's Choice between Fixed and Adjustable Rate Loan Contracts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(2), pages 110-116. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Geng Li & Paul A. Smith, 2008. "Borrowing from yourself: 401(k) loans and household balance sheets," Finance and Economics Discussion Series 2008-42, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Statistics
Access and download statistics

Did you know? All the bibliographic data shown here has been contributed by volunteers, thereby helping to keep this service free.

This page was last updated on 2009-11-18.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.