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- Title
Choice of Mortgage Contracts: Evidence from the Survey of Consumer Finances.
- Authors
Coulibaly, Brahima; Li, Geng
- Abstract
This study revisits the empirical question of the determinants of the choice between fixed- and adjustable-rate mortgages using data from the Survey of Consumer Finances that overcome some of the data limitations in previous studies. The results from a logit model of mortgage choice indicate that pricing variables and affordability are important considerations. We also find that factors, such as mobility expectations, income volatility and attitudes toward financial risk largely influence mortgage choice, with more risk-averse borrowers preferring fixed-rate mortgages. For households that are less risk averse, the mortgage type choice decision is less sensitive to pricing variables and income volatility, and affordability factors are not significant. These findings provide empirical support that underscores the importance of attitudes toward risks in mortgage choice.
- Subjects
UNITED States; HOUSE buying; DECISION making; FIXED rate mortgages; ADJUSTABLE rate mortgages; CONSUMER attitudes; RISK aversion
- Publication
Real Estate Economics, 2009, Vol 37, Issue 4, p659
- ISSN
1080-8620
- Publication type
Article
- DOI
10.1111/j.1540-6229.2009.00259.x