Rethinking Mortgage Design
John Campbell,
Andreas Fuster,
David Lucca,
Stijn Van Nieuwerburgh and
James Vickery ()
No 20150824, Liberty Street Economics from Federal Reserve Bank of New York
Abstract:
Because mortgages make up the majority of household debt in most developed countries, mortgage design has important implications for macroeconomic policy and household welfare. As one example, most U.S. mortgages have fixed interest rates?if interest rates fall, existing borrowers need to refinance to lower their interest payments. In practice, households are often slow to refinance, or may not be able to do so. As a result, the transmission of U.S. monetary policy is dampened relative to countries like the United Kingdom where mortgage rates on most loans adjust automatically with short-term interest rates. In this post, we discuss some of the key takeaways from a recent conference where policymakers, academics, practitioners, and other experts convened to discuss mortgage design and consider possible mortgage market innovations.
Keywords: Monetary Policy; Mortgages; Household Finance (search for similar items in EconPapers)
JEL-codes: D1 R3 (search for similar items in EconPapers)
Date: 2015-08-24
New Economics Papers: this item is included in nep-ure
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