Estimating Borrower Mobility from Observed Prepayments

REAL ESTATE ECONOMICS, Vol. 25 No. 3, Fall 1997

Posted: 4 Jul 1997

See all articles by John P. Harding

John P. Harding

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies

Abstract

This article describes a method used to estimate parameters describing the mobility of borrowers choosing fixed-rate mortgages. Using a mortgage valuation model that predicts prepayments contingent upon parameters describing the distribution of expected tenure in the home, the average mobility of borrowers can be estimated from observed prepayment behavior. This article estimates the mobility of borrowers who chose fixed-rate mortgages before 1980 and borrowers who chose similar mortgages in the second half of the 1980s, when adjustable-rate mortgages were widely available. The empirical results support the claim that the average mobility of fixed-rate borrowers has declined.

JEL Classification: R0

Suggested Citation

Harding, John P., Estimating Borrower Mobility from Observed Prepayments. REAL ESTATE ECONOMICS, Vol. 25 No. 3, Fall 1997, Available at SSRN: https://ssrn.com/abstract=9285

John P. Harding (Contact Author)

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies ( email )

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