Eres : Digital Library : Works

Paper eres2009_147:
What Are the Driving Forces Behind Swedish Housing Consumers’ Interest Rate Decisions?

id eres2009_147
authors Hullgren, Maria
year 2009
title What Are the Driving Forces Behind Swedish Housing Consumers’ Interest Rate Decisions?
source 16th Annual European Real Estate Society Conference in Stockholm, Sweden
summary This paper discusses the birth and growth of mortgage industry in Turkey and evaluates the prevailing 10-year fixed-rate mortgage (FRM) contracts with embedded prepayment and default options. In September 2007, seven months after the passage of mortgage law, almost every bank in our sample offered mortgage coupon rates that are significantly below the computed equilibrium mortgage coupon rates, involving a clear arbitrage profit for the borrowers. While the currently observed FRM coupon rates in November 2008 are approximately equal to the computed equilibrium mortgage coupon rates, 20-25 per cent coupon rates per annum are extremely high for establishing a wellfunctioning primary mortgage market in any economy. As every sample bank has significantly increased its mortgage coupon rates, and most of the banks have drastically reduced their contract maturities over the past year, we argue that the global financial crisis has affected visibly mortgage lending in Turkey."
keywords FRMs, Turkish mortgage market, option-pricing models, default option, prepayment option, explicit finite difference method
series ERES:conference
email maria.hullgren@infra.kth.se
content file.ppt (471,040 bytes)
discussion No discussions. Post discussion ...
ratings
session Housing
last changed 2009/09/16 16:22
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