NY Fed paper investigates decline in adjustable-rate mortgage
A New York Federal Reserve paper published in December explains why the market share of adjustable-rate mortgages in the United States is so low.
Emanuel Moench, James Vickery and Diego Aragon, the paper's authors, investigate why US homebuyers have increasingly preferred fixed-rate mortgages to adjustable-rate mortgages, with the market share of adjustable-rate mortgages in decline across all segments of the mortgage market.
They find that supply-side factors, in particular a rise in the share of mortgages eligible to be securitised by the housing government-sponsored enterprises, played a role in the low current adjustable-rate mortgages share, with the term structure of interest rates also having an impact on the pricing and mortgage choice of borrowers.
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