An Early Assessment of Residential Mortgage Performance in China

Yongheng Deng, Della Zheng () and Changfeng Ling ()

The Journal of Real Estate Finance and Economics, 2005, vol. 31, issue 2, 117-136

Abstract: The residential mortgage market becomes a financial engine for the booming residential housing development and sustained economic growth in China. Our study provides the first rigorous empirical analysis on the earlier performance of residential mortgage market in China based on a unique micro dataset of mortgage loan history collected from a major residential mortgage lender in China. We found that while the option theory fails to explain prepayment and default behavior in the residential mortgage market in China, other non-option theory related financial economic factors play major roles in determining the prepayment and default risks in China. We also found that borrower’s characteristics are significant in determining prepayment behavior, hence may be used as an effective tool for screening potential high risk borrowers in the loan origination process. Adopting a risk-based pricing in residential mortgage lending in China can improve the efficiency of the market, and enhance the credit availability to the most needed households, i.e., the younger households, blue-collar workers, lower income households, and help them become homeowners. Copyright Springer Science + Business Media, Inc. 2005

Keywords: Chinese mortgage market; prepayment and default; empirical hazard model; econometric analysis (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (20)

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DOI: 10.1007/s11146-005-1368-7

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