Mortgage choice and the pricing of fixed-rate and adjustable-rate mortgages
In the United States throughout 2009, the share of adjustable-rate mortgages among total mortgage originations was very low, apparently reflecting the attractive pricing of fixed-rate mortgages relative to ARMs. Government policy could have changed the relative attractiveness of the fixed-rate mortgages and ARMs, thereby shifting the market share of these two housing finance instruments. ; This Economic Letter reviews some of the factors determining consumer mortgage choices. It shows that ARM share has declined in ways that parallel the behavior of several key mortgage market interest rates. These developments have coincided with, among other things, Fed intervention in the market through large-scale MBS purchases. Thus, the Fed program, while supporting the functioning of the residential mortgage market overall, could have affected the composition of the mortgage market. To help understand this dynamic, this Letter estimates what the ARM share might have been under alternative scenarios in which fixed mortgage rates were higher, which would likely have been the case if the Fed had not been intervening in the market to the extent that it did.
Volume (Year): (2010)
Issue (Month): feb1 ()
|Contact details of provider:|| Postal: P.O. Box 7702, San Francisco, CA 94120-7702|
Phone: (415) 974-2000
Fax: (415) 974-3333
Web page: http://www.frbsf.org/
More information through EDIRC
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:fip:fedfel:y:2010:i:feb1:n:2010-03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noah Pollaczek)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.