Mortgage Prepayment Behavior in a Market with ARMs only

Jia He and Ming Liu ()
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Jia He: Chinese University of Hong Kong, Shatin, N.T., Hong Kong, http://se.cuhk.edu.hk
Ming Liu: Chinese University of Hong Kong, Shatin, N.T., Hong Kong, http://se.cuhk.edu.hk

International Real Estate Review, 1998, vol. 1, issue 1, 64-80

Abstract: 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.

Keywords: Prepayment function; Adjustable-rate mortgages; Proportional-hazard model (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 1998
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