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Discussion Paper
Why are Adjustable Rate Mortgages So Rare These Days?
The fraction of mortgage borrowers who choose an adjustable-rate loan has fallen significantly over the past five years or so. Although the fraction edged up slightly in 2010, it remains close to historic lows, with less than 10 percent of mortgage originations since 2009 featuring an adjustable interest rate. What explains the striking decline? And what are its implications for borrowers and policymakers?
Working Paper
The Mortgage Cash Flow Channel of Monetary Policy Transmission: A Tale of Two Countries
We study the mortgage cash flow channel of monetary policy transmission under fixed-rate mortgage (FRM) versus adjustable-rate mortgage (ARM) regimes by comparing the United States with primarily long-term FRMs and Spain with primarily ARMs that automatically reset annually. We find a robust transmission of mortgage rate changes to spending in both countries but surprisingly a larger effect in the United States—and provide two explanations for this finding. First, there are channels of transmission other than the mortgage cash flow effect since other interest rates co-move with the mortgage ...
Which Households Prefer ARMs vs. Fixed-Rate Mortgages?
Adjustable-rate mortgages appear to be more popular with younger, higher-income households that also have bigger mortgages, according to 2019 data.