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Mortgage Prepayment Behavior in a Market with ARMs only



A study on the prepayment behavior of Hong Kong mortgage loans is conducted. With all of the loans as adjustable-rate mortgages (ARMs), we find that 1) Prepayment speeds up and then slows down as the mortgage seasons; 2) Prepayment speeds up as the rate markup decreases; 3) Prepayment speeds up as the interest rate increases; 4) Prepayment speeds up when the profitability ratio of the banks ( the prime-HIBOR spread) is higher; 5) Prepayment speeds up as the price of the property market falls; 6) Prepayment speed is faster for loans with a lower loan-to-value ratio; 7) Prepayment exhibits a seasonal pattern: people tend to prepay in the summer.

Suggested Citation

  • Jia He & Ming Liu, 1998. "Mortgage Prepayment Behavior in a Market with ARMs only," International Real Estate Review, Asian Real Estate Society, vol. 1(1), pages 64-80.
  • Handle: RePEc:ire:issued:v:01:n:01:1998:p:64-80

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    Cited by:

    1. Nai Jia Lee, 2003. "Expected Return of Housing and Mortgage Termination," International Real Estate Review, Asian Real Estate Society, vol. 6(1), pages 75-101.

    More about this item


    Prepayment function; Adjustable-rate mortgages; Proportional-hazard model;

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services


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