Journal Article
Drivers of mortgage choices by risky borrowers
Abstract: During the past decade?s housing boom, borrowers with lower credit ratings were more likely than higher-rated borrowers to choose adjustable-rate mortgages. This raises the question of whether, amid rapidly rising house prices, lower-rated borrowers paid less attention to loan pricing and interest-rate-related factors. However, even accounting for house price appreciation, research shows these borrowers were as, if not more, responsive as higher-rated borrowers to changes in interest-rate-related fundamentals. Their tendency to choose adjustable-rate mortgages is consistent with mortgage decisions based on economic considerations, rather than just lack of financial sophistication
Access Documents
File(s):
File format is text/html
https://www.frbsf.org/wp-content/uploads/el2014-01.pdf
Description: Full Text
Bibliographic Information
Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2014
Order Number: 01