Heterogeneous Homebuyers, Mortgage Choice and the use of Mortgage Brokers

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Heterogeneous Homebuyers, Mortgage Choice and the use of Mortgage Brokers

Author Info

D. Duffy () (The Economic and Social Research Institute)
M.J. Roche (Economics, NUI Maynooth, Ireland)

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Abstract

Choosing 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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Publisher Info
Paper 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.

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Length: 29 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:may:mayecw:n1520205

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Postal: Maynooth, Co. Kildare
Phone: 353-1-7083728
Fax: 353-1-7083934
Web page: http://www.may.ie/academic/economics/
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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; Mortgages
R51 - Urban, Rural, and Regional 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)

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.:

Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
Other versions:
- Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 493-510, October. [Downloadable!] (restricted)
John Y. Campbell & Joao F. Cocco, 2003. "Household Risk Management And Optimal Mortgage Choice," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1449-1494, November. [Downloadable!] (restricted)
Other versions:
- Joao Cocco & John Campbell, 2004. "Household Risk Management and Optimal Mortgage Choice," Econometric Society 2004 North American Winter Meetings 632, Econometric Society. [Downloadable!]
- John Campbell & Joao F. Cocco, 2002. "Household Risk Management and Optimal Mortgage Choice," Computing in Economics and Finance 2002 47, Society for Computational Economics.
- 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)
- John Y. Campbell & Joao F. Cocco, 2002. "Household Risk Management and Optimal Mortgage Choice," Harvard Institute of Economic Research Working Papers 1946, Harvard - Institute of Economic Research. [Downloadable!]
- Joao Cocco & John Campbell, 2004. "Household Risk Management and Optimal Mortgage Choice," Econometric Society 2004 North American Winter Meetings 646, Econometric Society. [Downloadable!]
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)
Anglin, Paul M & Arnott, Richard, 1991. "Residential Real Estate Brokerage as a Principal-Agent Problem," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 99-125, June.
G. Stacy Sirmans & Enrico J. Ferreira, 1995. "The Pricing of Housing and Mortgage Services for First-Time Versus Repeat Homebuyers," Journal of Real Estate Research, American Real Estate Society, vol. 10(1), pages 115-127. [Downloadable!]

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