Less Financially Secure Borrowers More Likely to Choose Adjustable Mortgages

Posted To: MND NewsWire

Three staff member of the Federal Reserve Bank of San Francisco have published, on the Bank’s website, results of a study about what drives the mortgage choices of borrowers. The three, Fred Furlong, David Lang, and Yelena Takhtamanova looked at the question of whether lower-rated borrowers paid less attention to loan pricing and interest-rate-related factors because house prices were rising rapidly. They developed a model to account for the factors that influence mortgage choice. Earlier research has found that mortgage pricing and other interest-rate-related fundamentals are key but they also looked at housing market conditions and borrower characteristics, such as degree of financial constraint, attitudes towards risk, and mobility. Research has shown that financially constrained borrowers…(read more)

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