The mortgage rate conundrum

Alejandro Justiniano, Giorgio Primiceri and Andrea Tambalotti

No 829, Staff Reports from Federal Reserve Bank of New York

Abstract: We document the emergence of a disconnect between mortgage and Treasury interest rates in the summer of 2003. Following the end of the Federal Reserve?s expansionary cycle in June 2003, mortgage rates failed to rise according to their historical relationship with Treasury yields, leading to significantly and persistently easier mortgage credit conditions. We uncover this phenomenon by analyzing a large data set with millions of loan-level observations, which allows us to control for the impact of varying loan, borrower, and geographic characteristics. These detailed data also reveal that delinquency rates started to rise for loans originated after mid-2003, exactly when mortgage rates disconnected from Treasury yields and credit became relatively cheaper.

Keywords: credit boom; private label; securitization; subprime; housing boom (search for similar items in EconPapers)
JEL-codes: E32 E44 G21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2017-11-01
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: The Mortgage Rate Conundrum (2022)
Working Paper: The Mortgage Rate Conundrum (2017)
Working Paper: The Mortgage Rate Conundrum (2017)
Working Paper: The Mortgage Rate Conundrum (2017)
Working Paper: The Mortgage Rate Conundrum (2017)
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