Rate Level Indexed Mortgages: An Evaluation

John M. Harris and Daniel E. Page

Real Estate Economics, 1985, vol. 13, issue 2, 195-207

Abstract: In this paper, a new and superior alternative mortgage design is presented and evaluated. The mortgage design is motivated by a desire to reduce the exposure of both borrowers and lenders to risks that result from high and variable interest rates, while at the same time providing a mechanism by which changes in the real value of payments and rates of amortization can be controlled. In addition to a theoretical discussion of the merits of this design a simulation of the mortgage's performance is provided that uses market data from the period 1965 to 1983.

Date: 1985
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