Heterogeneous Homebuyers, Mortgage Choice and the use of Mortgage Brokers
AbstractChoosing a mortgage product in the face of labor income risk, interest rate risk and borrowing constraints is one of the most important decisions facing a household. This paper investigates the choice between a variety of fixed rate mortgages and adjustable rate mortgages. We find that households with a high loan-to-value ratio, risky income and high risk aversion are more likely to choose a fixed rate mortgage. Choosing a mortgage product relies market search and information. The paper finds that in general first-time homebuyers and those with a high loan-to-value ratio are more likely to use a mortgage broker.
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Bibliographic InfoPaper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n1520205.
Length: 29 pages
Date of creation: Feb 2005
Date of revision:
Mortgage choice; First-time homebuyer; Mortgage broker;
Find related papers by JEL classification:
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-29 (All new papers)
- NEP-FIN-2005-09-29 (Finance)
- NEP-MAC-2005-09-29 (Macroeconomics)
- NEP-URE-2005-09-29 (Urban & Real Estate Economics)
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