The Relative Termination Experience of Adjustable to Fixed-Rate Mortgages
Donald F Cunningham and
Charles Capone
Journal of Finance, 1990, vol. 45, issue 5, 1687-1703
Abstract:
The authors' study uses a multinomial logit model to analyze the concurrent termination experience of adjustable-rate and fixed-rate mortgages. A new set of adjustable-rate-mortgage-specific interactive determinants expands the conventional fixed-rate-mortgage specification to isolate the unique termination behavior of adjustable-rate mortgages. The authors find that expected rate adjustments and large lifetime caps are positively related to adjustable-rate-mortgage termination probabilities, while long adjustment frequencies are inversely related. Caps, both periodic and lifetime, have a secondary, inverse effect on termination probabilities when interest-rate movements exceed cap limits. The model also shows that interest-rate expectations affect fixed-rate-mortgage terminations more strongly than adjustable-rate-mortgage terminations. Copyright 1990 by American Finance Association.
Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:45:y:1990:i:5:p:1687-1703
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