Journal article
Heterogeneous Borrowers, Mortgage Selection, and Mortgage Pricing
Journal of housing research, Vol.6(2), pp.333-348
01/01/1995
Abstract
This article empirically analyzes the determinants of mortgage choice and the link between mortgage selection and mortgage pricing. We establish the link between selection and pricing by first estimating a multinomial logit model of mortgage choice in which contracts are differentiated by frequency of interest rate adjustment. Next, given self-selection, we extract from the estimated choice equation the notional prices or interest rates that will make the average borrower indifferent between the contract the borrower strictly prefers and all other contracts in the choice set. The impact of mortgage price variables differs across the alternative contracts. Borrower characteristics, particularly mobility and affordability, influence mortgage choice. The notional prices suggest that to get the average borrower to choose other contracts given self-selection, the other contracts in the choice set would have to be cheaper relative to the strictly preferred contract than they are in actuality.
Details
- Title: Subtitle
- Heterogeneous Borrowers, Mortgage Selection, and Mortgage Pricing
- Creators
- Jarjisu Sa-AaduIsaac F. Megbolugbe
- Resource Type
- Journal article
- Publication Details
- Journal of housing research, Vol.6(2), pp.333-348
- Publisher
- Office of Housing Policy Research, Fannie Mae
- ISSN
- 1052-7001
- eISSN
- 2691-1337
- Language
- English
- Date published
- 01/01/1995
- Academic Unit
- Finance
- Record Identifier
- 9984380626002771
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