Did quantitative easing reduce US mortgage rates?

Submitted by: BBlack 104

Yes. Note that some studies in this list give us reason to question their conclusions. This may be because they were published in sources that are not peer-reviewed, are low ranked or not ranked at all, which may indicate limited editorial oversight. Alternatively, it may be because they were criticized in a published article or produced by a financially interested or ideologically motivated source. Carefully review the individual study summaries below for more information.
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Chart summary of 3 studies examining this question

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Additional Recommended Studies Not in this List (yet)

SUMMARIES OF STUDIES
Total studies in list: 3
Sorted by publication year
1
The Effects of the Fed's Quantitative Easing Announcements on the U.S. Mortgage Market: An Event-Study Analysis
"This paper uses regression based event-study analysis to examine the response of the 30-year mortgage rate to the Federal Reserve’s Quantitative Easing (QE) announcements in zero lower bond period. A total of 35 QE announcements from 2008 to 2015 are selected in reference to previous literature and my own discretion. Each announcement is then identified by a certain type and in a QE round. After model validation, the best-fitting IGARCH model with skewed t distribution is used to measure the QE announcement effects on daily changes of 30-year mortgage rate, 30-year Treasury rate and the spread between them. Abnormal returns (changes), cumulative abnormal returns and their long-run values of the mortgage rate for each announcement within 1-day, 3-day and 5-day event windows are calculated and reported. In event windows, announcements suggesting the start of a new round of QE reduced the mortgage rate tremendously, while the effects of further news conveying a continuation of the current QE policy diminished. Announcements of an increase in mortgage-backed security purchases decreased the mortgage rate more than the Treasury rate and reduced the credit risk of holding mortgage securities over Treasury securities. Two robustness checks find that the shocks of macro-economy and mortgage rate determinants were trivial in influencing abnormal returns and cumulative abnormal returns of the mortgage rate on average, and the results do not change so much if the model is controlling for the 10-year Treasury rate instead of the 30-year Treasury rate."
AUTHOR
Gang Wang
PUBLISHED
2016 in SSRN Electronic Journal
Preprint
Yes
Yes
2
How the Federal Reserve's Large-Scale Asset Purchases (LSAPs) Influence Mortgage-Backed Securities (MBS) Yields and U.S. Mortgage Rates
"We conduct an empirical analysis of the Federal Reserve's large-scale asset purchases (LSAPs) on MBS yields and mortgage rates. The Federal Reserve's accumulation of MBS and Treasury securities lowered MBS yields and mortgage rates by more than what would have been suggested by changes in market expectations alone, suggesting that portfolio rebalancing effects of LSAPs are an important consideration for monetary policy transmission. Our estimates also suggest that the Federal Reserve must hold a substantial market share of agency MBS or of Treasury securities to significantly lower MBS yields and in turn significantly lower mortgage rates."
AUTHORS
S.Wayne Passmore
Diana Hancock
PUBLISHED
2014 in FEDS Working Paper
UNRANKED SOURCE
Yes
Yes
3
Fed Asset Buying and Private Borrowing Rates
"Past rounds of large-scale asset purchases by the Federal Reserve have lowered yields not onlyon the targeted securities, but also on various private borrowing rates. In particular, yields oncorporate bonds and primary mortgage rates decreased in response to Fed asset purchaseannouncements. Notably, however, the link between rates on mortgage-backed securities andactual mortgage rates has weakened in the wake of the financial crisis."
AUTHOR
Michael D. Bauer
PUBLISHED
2012 in FRBSF Economic Letter
UNRANKED SOURCE
Yes
Yes







ADDITIONAL STUDIES TO CONSIDER ADDING TO LIST
Total additional studies: 22
State of K's algorithms generated the list of studies below based on the studies that were added to the above list. Some of these studies may also examine: "Did quantitative easing reduce US mortgage rates?" If a study examines this question, add it to the list by pressing the button.

Only add studies that examine the same question. Do not add studies that are merely on the same topic.

Did Quantitative Easing Affect Interest Rates Outside the US? New Evidence Based on Interest Rate Differentials
"This paper explores the effects of non-standard monetary policies on international yield relationships. Based on a descriptive analysis of international long-term yields, we find evidence that long-term rates have followed a global downward trend prior to as well as during the financial crisis. Comparing interest rate developments in the United States and the Eurozone, it appears difficult to find a distinct impact of the Fed’s QE1 on US interest rates for which the global environment – the global downward trend in interest rates – does not account.

Motivated by these results, we analyze the impact of the Fed’s QE1 program on the stability of the US-Euro long-term interest rate relationship by using a CVAR and, in particular, recursive estimation methods. Using data between 2002 and 2014, we find limited evidence that QE1 caused a breakup or a destabilization of the transatlantic interest rate relationship. Taking global interest rate developments into account, we thus find no significant evidence that QE had an independent, distinct impact on US interest rates."
AUTHORS
Thomas Ulrich Osowski
Daniel Gros
Ansgar Hubertus Belke
PUBLISHED
2015 in SSRN Electronic Journal

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Case Study
"In the 1970s banks began selling mortgages to public and private mortgage funds that sell shares to investors. In the late 1990s and early 2000s, many mortgages to “subprime” borrowers with low credit ratings and modest income were approved because banks and mortgage brokers made money by making loans and then selling them, and didn’t care if borrowers defaulted. Matters were complicated by financial engineering and compliant rating agencies. The Great Recession resulted from many people falling into several of the pitfalls of data science. They fooled themselves, they worshipped mathematics, they used bad data, they tortured data, and they did harm."
AUTHORS
Jay Cordes
Gary Smith
PUBLISHED
2019 in The 9 Pitfalls of Data Science

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Did Quantitative Easing Increase Income Inequality?
You can view the abstract at: https://doi.org/10.2139/ssrn.2692637
AUTHORS
Gerald Epstein
Juan Antonio Montecino
PUBLISHED
2015 in SSRN Electronic Journal

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The Effects of Quantitative Easing on Interest Rates
"We evaluate the effect of the Federal Reserve’s purchase of long-term Treasuries and other long-term bonds ("QE1" in 2008-2009 and "QE2" in 2010-2011) on interest rates. Using an event-study methodology that exploits both daily and intra-day data, we find a large and significant drop in nominal interest rates on long-term safe assets (Treasuries, Agency bonds, and highly-rated corporate bonds). This occurs mainly because there is a unique clientele for long-term safe nominal assets, and the Fed purchases reduce the supply of such assets and hence increase the equilibrium safety-premium.

We find only small effects on nominal (default-adjusted) interest rates on less safe assets such as Baa corporate rates. The impact of quantitative easing on MBS rates is large when QE involves MBS purchases, but not when it involves Treasury purchases, indicating that a second main channel for QE is to affect the equilibrium price of mortgage-specific risk. Evidence from inflation swap rates and TIPS show that expected inflation increased due to both QE1 and QE2, implying that reductions in real rates were larger than reductions in nominal rates.

Our analysis implies that (a) it is inappropriate to focus only on Treasury rates as a policy target because QE works through several channels that affect particular assets differently, and (b) effects on particular assets depend critically on which assets are purchased."
AUTHORS
Arvind Krishnamurthy
Annette Vissing-Jorgensen
PUBLISHED
2011 in SSRN Electronic Journal

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Highly regarded source
The Response of Interest Rates to US and UK Quantitative Easing
"We analyse declines in government bond yields following announcements by the Federal Reserve and the Bank of England of plans to buy longer term debt. Using dynamic term structure models, we decompose US and UK yields into expectations about future short‐term interest rates and term premiums. We find that declines in US yields mainly reflected lower expectations of future short‐term interest rates, while declines in UK yields appeared to reflect reduced term premiums.

Thus, the relative importance of the signalling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communication policies."
AUTHORS
Glenn D. Rudebusch
Jens H. E. Christensen
PUBLISHED
2012 in The Economic Journal

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What Does a Swiss Franc Mortgage Cost? The Tale of Polish Trust for Foreign Currency Denominated Mortgages: Implications for Well-Being and Health.
"It is commonly agreed that excessive household financial debts are detrimental to psychological and physical health. Research also demonstrates that housing instability, mortgage indebtedness and mortgage foreclosure negatively influence subjective well-being. In Poland at the beginning of 2015, homeowners with Swiss franc denominated mortgages suffered from an abrupt swing in the Swiss franc/Polish zloty (CHF/PLN) exchange rate, which resulted in considerable increase in the local currency value of their mortgages. These adverse financial circumstances were hypothesised to affect not only household finance but also negatively affect the psychological well-being and physical health of peoples. The 2013 and 2015 waves of the Polish representative household panel 'Social Diagnosis' were used to examine impact of the abrupt change in the CHF/PLN exchange rate in Jan. 2015 on well-being and health. Causal inference was investigated using a difference-in-differences matching estimator. Results showed that although impact of Swiss franc appreciation on the mortgage related financial burden was considerable, it did not affect well-being or health outcomes. Any manifestation of adverse effects was absent in the short term, which does not however preclude their long term existence."
AUTHORS
Piotr Białowolski
Dorota Węziak-Białowolska
PUBLISHED
2017 in Social Indicators Research

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The Effects of Quantitative Easing Announcements on the Mortgage Market: An Event Study Approach
"This paper uses event study analysis to estimate the impact of the Fed's Quantitative Easing (QE) announcements on the mortgage market during zero lower bound period. A total of 35 QE announcements are identified and their effects are evaluated. The best-fitting IGARCH model with skewed t distribution is used to measure the QE announcement effects on daily changes of the 30-year mortgage rate, the 30-year Treasury rate and the spread between them. Announcements suggesting the start of a new round of QE reduced the mortgage rate tremendously, while the effects of further news diminished. Announcements of an increase in mortgage-backed security purchases decreased the mortgage rate more than the Treasury rate and reduced the credit risk of holding mortgage securities over Treasury securities. The long run effects of QE announcements on the mortgage rate were less than short run effects but persistent. We also find that the previous literature overestimate QE effects on interest rates in general."
AUTHOR
Gang Wang
PUBLISHED
2018 in MDPI AG

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The Effects of Quantitative Easing Announcements on the Mortgage Market: An Event Study Approach
"This paper uses event study analysis to estimate the impact of the United States Federal Reserve Bank’s (Fed) quantitative easing (QE) announcements on the mortgage market during the zero lower bound (ZLB) period. A total of 35 QE announcements are identified and their effects are evaluated. The best-fitting integrated generalized autoregressive conditional heteroskedasticity (IGARCH) model with skewed t distribution is used to measure the QE announcement effects on daily changes of the 30-year mortgage rate, the 30-year Treasury rate and the spread between them. Announcements suggesting the start of a new round of QE reduced the mortgage rate tremendously, while the effects of further news diminished. Announcements of an increase in mortgage-backed security purchases decreased the mortgage rate more than the Treasury rate and reduced the credit risk of holding mortgage securities over Treasury securities. The delayed effects of QE announcements on the mortgage rate were less than short-run effects but persistent. We also find that the previous literature overestimates QE effects on interest rates in general."
AUTHOR
Gang Wang
PUBLISHED
2019 in International Journal of Financial Studies

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Housing and mortgage markets in the everyday: how globalisation came home
"This chapter focuses on the globalisation and liberalisation of mortgage markets. What has happened is that the mortgage market has become a conduit between global finance and the everyday. The home has become financialised in ways that were impossible before banking deregulation. For homeowners, the ability to unlock housing equity has been a widely used practice almost since the start of the deregulated mortgage market in the 1980s. This has created a super-commodified realm at the heart of the competition state. The democratisation of access to capital also required a new citizenship contract based around norms of risk taking and self-provisioning. More than this, however, homeowners are predisposed to support low-tax public policy because of the front-loading of housing costs."
AUTHOR
Stuart Lowe
PUBLISHED
2017 in Social Policy in an Era of Competition (Book)

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An Evaluation of Turkish Mortgage System from the Perspective of Global Economic Crisis
"Turkish mortgage system was established by the law number 5582 and the title of "The Law Amending the Laws Related to Housing Finance System" in 2007. Even though the entry into force of this act expressed as "Pay the rent as the landlord-performing”, no bring up short of the interest rates of a housing loan were observed. In fact, Mortgage application could not be branch out yet. The distinguishing feature of the mortgage system, mortgage collateral pools of consumer loans with guaranteed by mortgage backed securities to be issued, sold in the capital market, also called the mortgage money is the safeguard of cheap funds. Using this fund for financing provided by banks as a result of re-housing resource for the consumer to pay the cost of housing loan interest rate is relatively go into a decline.
Meanwhile, after the abundance of finance in the world, the so-called subprime mortgage, loans to non-qualified borrower, triggered the world economic crisis occurred. May well be, Turkey was unimpressed the crisis because of the not being set secondary mortgage market. All the public in charge of economy has introduced prevention of packages of measures.
"
AUTHOR
Mustafa Topaloğlu
PUBLISHED
2011 in International Conference on Eurasian Economies 2011

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11. Mortgages
"A mortgage is a form of security for a loan, the purpose of which is often to finance the purchase of a house. This type of mortgage is known as acquisition mortgage. The house can also be used as security for other borrowing (for example, to pay for an extension to a house) or to finance a small business. Such mortgages are generally termed second, or even third, mortgages. The person who creates the mortgage is called the mortgagor and the person in whose favour it is created is called the mortgagee. The mortgagee is a secured creditor and can transfer the mortgage to another person. This chapter, which focuses on the nature of mortgages and how they are created, also discusses the role of mortgages, types of mortgage, rights of the mortgagor, rights and remedies of the mortgagee, and priority of mortgages."
AUTHORS
Martin George
Antonia Layard
PUBLISHED
2019 in Thompson's Modern Land Law

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Recent Development Related to Mortgage Backed Securities in Turkey
"While mortgage backed securities are extremely important for prospering economies especially, these securities are kinds of securities capital market instruments that show increase significantly for last 30 years. These make it convenient for development of the capital market and consumers to obtain housing cost-efficiently, in that these securities provide effective fund flow from different and new financing trough. All over the world mortgage based securities are issued by two securitization ways that: the first one is off-balance sheet securitization, mortgage backed securities which are common on countries, are dominated by Anglo-Saxon financing system and another one is in the balance sheet securitization, mortgage bond system is common in Continental Europe. In the context of the Turkey practice of mortgage backed securities is enforced by Mortgage Code numbered 5582, dated 2007. And then this matter is reconverted by Capital Market Code numbered 6362 and its relevant secondary regulation."
AUTHOR
Mustafa Topaloğlu
PUBLISHED
2016 in International Conference on Eurasian Economies 2016

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9. Mortgages
"This chapter deals with important issues arising in relation to a mortgage taken out by a client to assist in financing the purchase of a property. It looks at the most popular types of mortgage, the impact of the Financial Services and Markets Act 2000, and other matters, including important professional conduct issues. It also considers mortgages of leasehold property and mortgages of commercial property."
AUTHORS
Mark Richards
Robert Abbey
PUBLISHED
2019 in Property Law 2019-2020

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The Mortgage Foreclosure Rage: A Behavioral Perspective
"Residential real estate foreclosures reached historic records since the 2008 recession in the United States. While other studies on mortgage defaults and foreclosures focus primarily on individual causal factors leading to the outcome, this paper explores the nature and origins underlying these factors from a behavioral perspective. We argue that: (i) failures in mortgage risk management were due to overconfidence, anchoring, and reference-dependence given constraints in quantitative measurements in inter-temporal terms in a reductionist system; (ii) mortgage derivatives with outsized volume made the lending system dependent on a wider range of externalities with significant ramifications, and thereby more fragile given its misleading assumptions of uncorrelated rather than correlated market behavior; (iii) residential mortgage-backedsecurities (MBS) created illusions of control among market participants due to mental framing, myopia, and other limitations of human cognition; (iv) psychological biases were influenced by product design and lending procedures that promote short-term profits unsuited for a home mortgage; (v) product complexity reduces transparency, intensifies ambiguity aversion, self-serving biases, and default contagion that ultimately led to market breakdown and massive foreclosures. This study contributes to the theories in finance and economics through applications of behavioral measures to current market dynamics. It aims to reveal an idealized but biased system given human characteristics leading to failures in the financial and related industries and to inform policymakers on involuntary consequences in the development of home mortgage products that demand more profound reflections in the regulatory reform process."
AUTHORS
Caroline E. W. Glackin .
Beryl Y. Chang
PUBLISHED
2012 in Journal of Economics and Behavioral Studies

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Legal Protection for the Creditor as the Mortgage Holder for Granting Loan Using Collateral Land and Building Against Bad-Loan Debtor
"The writing of this article is based on a research that aims to analyze and identify the application of prudential banking principles in loan agreement by the bank as creditor for granting loans using collateral land and building as well as to analyze and describe legal protection for creditor as the mortgage holder for granting loan using collateral land and building against bad-loan debtor. The method used is normative legal research using statute and conceptual approaches. Based on the results of the study, mortgage certificate has a permanent, executorial and legal force. It has an executive force that is equivalent to a court decision that has permanent legal force and applies as a substitute for grosse acte hypotheek as long as it concerns land rights. To secure the loan granted to the debtor, the mortgage certificate holder, especially the Bank, has received legal protection in the form of a droit de preference (having precedence rights over other creditors), droit de suite, the ease of auction. In this case, the mortgage object is protected from bankruptcy and it cannot be divided into mortgage objects."
AUTHORS
Ulfanora Ulfanora
Alfi Hidayat
Sukanda Husin
PUBLISHED
2019 in International Journal of Multicultural and Multireligious Understanding

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The Impact of Quantitative Easing on Interest Rates
You can view the abstract at: https://doi.org/10.1007/978-1-4614-9646-5_4
AUTHORS
Kjell Hausken
Mthuli Ncube
PUBLISHED
2013 in Quantitative Easing and Its Impact in the US, Japan, the UK and Europe (Book)

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Housing Wealth or Collateral: How Home Value Shocks Drive Home Equity Extraction and Spending
"Abstract
We examine whether unanticipated changes in home values drive spending and mortgage-based equity extraction. To do this, we use longitudinal survey data with subjective information about current and expected future home values to calculate unanticipated home value changes. We link this information at the individual level to high quality administrative records containing information about mortgage borrowing as well as savings in various financial instruments. We find that the marginal propensity to increase mortgage debt is 3%–5% of unanticipated home value gains. We find no adjustment to other components of the portfolio, and we find that mortgage extraction leads to an increase in spending. The effect is driven by young households with high loan-to-value ratios, which is consistent with the effect being driven by collateral constraints. Further, we find that the effect is driven by home owners who actively take out a new mortgage. The price effect is magnified among fixed rate mortgage (FRM) borrowers who have an incentive to refinance their loans to lock in a lower market rate. These results point to the importance of the mortgage market in transforming price increases into spending and suggest that monetary policy can play an important role in transforming housing wealth gains into spending by affecting interest rates on mortgage loans."
AUTHORS
Henrik Yde Andersen
Søren Leth-Petersen
PUBLISHED
2020 in Journal of the European Economic Association

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Dampak Kebijakan Loan to Value dan Variabel Makroekonomi terhadap Permintaan Kredit Pemilikan Rumah
"Tujuan dari penelitian ini untuk mengetahui dan menganalisis pengaruh suku bunga kredit, inflasi, pertumbuhan ekonomi, loan to deposit ratio, loan to value terhadap permintaan kredit pemilikan rumah di Jawa Tengah. Variabel dalam penelitian ini adalah permintaan kredit pemilikan rumah, suku bunga kredit, inflasi, pertumbuhan ekonomi, loan to deposit ratio, loan to value. Data dianalisis dengan metode kuantitatif. Alat yang digunakan adalah analisis regresi linier berganda. Hasil penelitian menunjukkan bahwa suku bunga kredit dan inflasi berpengaruh negatif dan signifikan terhadap permintaan kredit pemilikan rumah di Jawa Tengah. Pertumbuhan ekonomi dan loan to deposit ratio berpengaruh positif dan signifikan terhadap kredit pemilikan rumah di Jawa Tengah. Loan to value tidak berpengaruh terhadap permintaan kredit pemilikan rumah di Jawa Tengah..
 
The purpose of this study is to know and analyze the effect of credit interest rates, inflation, economic growth, loan to deposit ratio, loan to value to mortgages demand in Central Java.  The sample of this study is mortgages demand, credit interest rates, inflation, economic growth, loan to deposit ratio, loan to value. The collect data was analyzed using quantitative method. This study used multiple linear regression analysis. The results of this study indicate that the credit interest rates and inflation is negative and significant effect towards mortgages demand in Central Java. Economic growth and loan to deposit ratio of positive and significant effect towards the mortgages in Central Java. Loan to value has no effect towards mortgages demand in Central Java."
AUTHOR
Sandi Atmaja Siravati
PUBLISHED
2018 in Economics Development Analysis Journal

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INDICATORS OF BANKING ACTIVITY — A LEADING INDICATORS OF SOCIO-ECONOMIC DEVELOPMENT OF REGIONS (ON THE EXAMPLE OF THE CENTRAL FEDERAL DISTRICT)
"Officially published statistics on socio-economic development of the regions implies significant disadvantages such as considerable time delay and insufficient validity. Analysis of banking indicators greatly contributes to easing the problems. Indicators on payment dynamics, changes in payment and settlement infrastructure, the structure of the bank resources, and lending to various loaners successfully complement and verify findings based on the traditional economic data on the real sector of the economy and the financial condition of citizens. In the Central Federal District, data on the banking sector activity confirms the official economic growth rates. During research no relations were found between the average per capita income and the amount of bank savings of individuals. We revealed the dominance of mortgage lending in the debt structure of individuals. Share of mortgage lending is larger in the most depressive regions. We figured out the inverse relationship between the growth of debt load and overdue debt in Central Federal region. The large companies contribute to the development of the most successful regions the way more than small and medium-sized business. Digitalization is a sequence of economic growth."
AUTHORS
A. S. Schegolev
D. V. Domaschenko
PUBLISHED
2019 in Federalism (Book)

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The Slowdown in Residential Investment and Future Prospects
"Using a statistical model, we find that three factors explain most of the decline in residential investment at the end of 2013 and the beginning of 2014: the increase in mortgage rates since early 2013, the unusually cold winter, and a modest tightening of lending standards in the residential mortgage market. Future prospects for residential investment depend heavily on mortgage rates. A return to normal weather and easing lending standards would boost activity, but even moderate increases in mortgage rates through the end of next year could restrain residential investment going forward."
AUTHORS
Saeed Zaman
Edward S. Knotek II
PUBLISHED
2014 in Economic Commentary (Federal Reserve Bank of Cleveland)

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Analysis of the factors influencing access to mortgage finance in Lagos, Nigeria
"Finance is the bedrock of real estate development. Its availability and accessibility are important for a successful investment. In most cases, investors don’t have substantial finance to execute a project; instead, they resort to an external source through mortgage financing. However, there are difficulties in accessing mortgage finance particularly due to borrower’s default, thereby hindering finance accessibility. This study investigates factors determining mortgage finance accessibility for providing real estate projects in Lagos State, Nigeria. The target populations are the Primary Mortgage Institutions and Real Estate Developers in Lagos State. The collected data were analysed using factor analysis and Mann-Whitney U test. The study revealed that income, nature of the occupation, type of collateral, years of the banking relationship, loan duration and loan sector are the major determinants of access to mortgage finance. These factors must be succinctly considered to ensure ease of access, adequate provision and utilisation for real estate development.
Keywords: Collateral, determinants, finance, investors, mortgage."
AUTHORS
Solomon O. Olawumi
Abiodun K. Oyetunji
Amos A. Adewusi
PUBLISHED
2019 in Global Journal of Business, Economics and Management: Current Issues

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The impact of inflation on the cost of adjustable-rate mortgages
"Aim: To assess how inflation affects the cost of adjustable-rate mortgage from the perspective of personal finances.Design / Research methods: Adjustable-Rate Mortgage simulations were carried out, showing both the nominal and real costs of a mortgage loan. The behavior and the relationship between the inflation rate and WIBOR 3M rate were compared.Conclusions / findings: The analysis shows that the real cost of mortgage decreases with an increase in inflation. During the period under review, inflation declined, reducing both the real and nominal cost of the loan. There was a strong positive correlation between the WIBOR 3M rate and the inflation rate. Equally strong, although a negative correlation was observed between the inflation rate and the real interest rate. With the decline in inflation, real mortgage rates increased, and vice versa. Particular attention was paid to the periods in which inflation was rising. WIBOR 3M rate reacted to this increase to a much lesser extent and with a lag compared to the inflation rate.Originality / value of the article: Considering that forecasts presented by the National Bank of Poland predict inflation growth in the coming years, a thorough examination of the inflation impact on the mortgage costs is an important issue for risk management in households with mortgage."
AUTHOR
Tomasz Musiałowski
PUBLISHED
2018 in The Central European Review of Economics and Management

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