scholarly journals Evaluating Borrower's Net Yield in Long-Term Fixed Rate Mortgage Loans in Korea

2019 ◽  
Vol 4 (No. 1 Apr 2019) ◽  
pp. 1-16
Author(s):  
Seung Ryul Ma
Keyword(s):  
Interest Rates ◽  
Mortgage Market ◽  
Market Condition ◽  
Fixed Rate ◽  
Mortgage Loans ◽  
Main Hypothesis ◽  
Expected Gain ◽  
Mortgage Interest Rate ◽  
The Difference

The Korean government has tried to change the structure of residential mortgages in Korea from the short-term variable-rate non-amorting loans to the long-term fixed-rate amorting loans since the early 2000’s. This study examines he borrower’s net yield from that new type of loans, which is defined as the difference between the lender’s yield out of the borrower’s repayment and the borrower’s yield from the expected gain on the portion of housing equity funded by cosnumer. The main hypothesis tested is that the borrower’s net yield will be affected by the time of loan origination and the level of mortgage interest rate charged because the future fluctuations of housing values and that of market interest rates are expected to be key determinants. The results confirm the hypothesis in that borrower’s net yields show positive or negative values according to the time of loan start, the level of fixed loan rates, or home regions. The results documented can offer a useful information as to the financial consumers’decision on loan amount and the timing of loan application considering the housing and mortgage market condition, which in turn can provide policy implication to regulating the maximum loan-to-value (LTV) ratio regulations.

scholarly journals Housing Wealth or Collateral: How Home Value Shocks Drive Home Equity Extraction and Spending

2020 ◽  
Author(s):  
Henrik Yde Andersen ◽  
Søren Leth-Petersen
Keyword(s):  
Interest Rates ◽  
Mortgage Market ◽  
Housing Wealth ◽  
Home Equity ◽  
Fixed Rate ◽  
Mortgage Loans ◽  
Mortgage Debt ◽  
Individual Level ◽  
Home Value ◽  
Home Values

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.

scholarly journals Guaranteed Annuity Options

2003 ◽  
Vol 33 (02) ◽  
pp. 125-152 ◽  
Author(s):  
Phelim Boyle ◽  
Mary Hardy
Keyword(s):  
Interest Rates ◽  
Insurance Companies ◽  
Retirement Savings ◽  
Fixed Rate ◽  
Life Annuity ◽  
Stock Market Performance ◽  
New Business ◽  
The Difference ◽  
The Cost

Under a guaranteed annuity option, an insurer guarantees to convert a policyholder's accumulated funds to a life annuity at a fixed rate when the policy matures. If the annuity rates provided under the guarantee are more beneficial to the policyholder than the prevailing rates in the market the insurer has to make up the difference. Such guarantees are common in many US tax sheltered insurance products. These guarantees were popular in UK retirement savings contracts issued in the 1970's and 1980's when long-term interest rates were high. At that time, the options were very far out of the money and insurance companies apparently assumed that interest rates would remain high and thus that the guarantees would never become active. In the 1990's, as long-term interest rates began to fall, the value of these guarantees rose. Because of the way the guarantee was written, two other factors influenced the cost of these guarantees. First, strong stock market performance meant that the amounts to which the guarantee applied increased significantly. Second, the mortality assumption implicit in the guarantee did not anticipate the improvement in mortality which actually occurred. The emerging liabilities under these guarantees threatened the solvency of some companies and led to the closure of Equitable Life (UK) to new business. In this paper we explore the pricing and risk management of these guarantees.

scholarly journals Guaranteed Annuity Options

2003 ◽  
Vol 33 (2) ◽  
pp. 125-152 ◽  
Author(s):  
Phelim Boyle ◽  
Mary Hardy
Keyword(s):  
Interest Rates ◽  
Insurance Companies ◽  
Retirement Savings ◽  
Fixed Rate ◽  
Life Annuity ◽  
Stock Market Performance ◽  
New Business ◽  
The Difference ◽  
The Cost

Under a guaranteed annuity option, an insurer guarantees to convert a policyholder's accumulated funds to a life annuity at a fixed rate when the policy matures. If the annuity rates provided under the guarantee are more beneficial to the policyholder than the prevailing rates in the market the insurer has to make up the difference. Such guarantees are common in many US tax sheltered insurance products. These guarantees were popular in UK retirement savings contracts issued in the 1970's and 1980's when long-term interest rates were high. At that time, the options were very far out of the money and insurance companies apparently assumed that interest rates would remain high and thus that the guarantees would never become active. In the 1990's, as long-term interest rates began to fall, the value of these guarantees rose. Because of the way the guarantee was written, two other factors influenced the cost of these guarantees. First, strong stock market performance meant that the amounts to which the guarantee applied increased significantly. Second, the mortality assumption implicit in the guarantee did not anticipate the improvement in mortality which actually occurred.The emerging liabilities under these guarantees threatened the solvency of some companies and led to the closure of Equitable Life (UK) to new business. In this paper we explore the pricing and risk management of these guarantees.

The Evolution and Importance of Public Credit

2011 ◽  
Author(s):  
David Stasavage
Keyword(s):  
Interest Rates ◽  
Early Modern Europe ◽  
Access To Credit ◽  
Public Credit ◽  
The Difference ◽  
City States ◽  
The Cost ◽  
Territorial States ◽  
New Evidence

This chapter examines why access to credit was important for European states and provides extensive new evidence on the evolution of public credit across five centuries, from 1250 to 1750. The ability to borrow was critical in medieval and early modern Europe because it allowed states to participate in wars, either defensive or offensive. In order to better understand this fact, the chapter analyzes the movement that took place from compulsory to paid service for soldiers, along with opportunities to finance wars through current taxation. It also explains when states first borrowed long-term and measures the cost of borrowing, focusing on interest rates based on nominal rates at issue when these are available, and based on the fiscal proxy when they are not. The chapter highlights the difference between city-states and territorial states, with the former enjoying an apparent financial advantage that allowed them to begin borrowing earlier and to obtain access to lower-cost finance.

Forecast and Development Prospects of the Russian Mortgage Market

2021 ◽  
Vol 9 (4) ◽  
pp. 57-66
Author(s):  
D. Stepanova ◽  
D. Mironova
Keyword(s):  
Factor Analysis ◽  
Interest Rates ◽  
Market Analysis ◽  
Mortgage Market ◽  
Mortgage Loans ◽  
Current State ◽  
Federal Districts ◽  
Further Development ◽  
Development Prospects ◽  
Credit Institutions

The study discusses the current state of the mortgage market in Russia, identifies its main trends and trends of further development based on the results of market analysis for 2018-2020. The dynamics of the volume of issued housing mortgage loans in Russia as a whole and in the context of federal districts, the dynamics of interest rates for various types of mortgages are presented, the trend of reduction of credit institutions providing mortgage loans is analyzed, and the rating of Russian banks in terms of the volume of mortgage loans is presented. A factor analysis of the volume dynamics of housing mortgage loans is carried out, and the preconditions for the growth of the Russian mortgage market are identified.

scholarly journals Basis Risk and Net Interest Income of Banks

2016 ◽  
Vol 16 (2) ◽  
pp. 40-59
Author(s):  
Piotr Mielus ◽  
Tomasz Mironczuk ◽  
Anna Zamojska
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Balance Sheet ◽  
Actual Cost ◽  
Short Term ◽  
Basis Risk ◽  
Interest Income ◽  
The Difference

Abstract The results of the banking sector are shaped primarily by commissions and net interest income. Net interest income is determined by the difference between the profitability of bank assets and liabilities. In the case when a different method is used to determine interest for each side of the balance sheet, there occurs a basis risk that may lead to the deterioration in the net interest income of the sector. This is the situation in the Polish banking sector, which is characterized by the presence of variable interest rates for long-term assets and fixed interest rates for short-term liabilities. The study aims to verify the following thesis: in an environment of falling interest rates we can observe the deterioration in net interest income of the banking sector, as a result of the materialization of the basis risk. The authors of the article state that the source of the basis risk is the mismatch between the reference rate used to define the interest flow of loans and the actual cost of financing the balance through term deposits collected from non-financial entities.

scholarly journals THE NATURE OF MORTGAGE REPAYMENT PLANS IN GHANA

2020 ◽  
Vol 2 (3) ◽  
pp. 91-104
Author(s):  
Justice Agyei Ampofo
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Supply And Demand ◽  
Mortgage Lending ◽  
Housing Finance ◽  
Fixed Rate ◽  
Mortgage Loans ◽  
Middle Income ◽  
Exchange Rate Fluctuations ◽  
Lending Institutions

Mortgage finance is one source of capital that cannot be ruled out when it comes to housing finance. It has globally aided many countries in terms of housing finance. A country’s housing finance system can work effectively if there is/are mortgage repayment plan(s) that would ensure flexibility in repayment of mortgage loans and encourage supply and demand for mortgage products. The study sought to find out the types and nature of mortgage repayment plans in Ghana. All the financial institutions which were into mortgage banking constituted the sample. The result shows that fixed rate method is the commonest method used in Ghana and other repayment plans have evolved from the fixed rate repayment plan. Exchange rate fluctuations, high interest rates and high house prices result in higher initial monthly mortgage repayment using the fixed rate repayment plan. It is recommended that mortgage lending institutions should reduce their interest rate for low middle income earners in Ghana to qualify for mortgage.

scholarly journals Mortgage volume and macroeconomic factors: Evidence from Turkey

2021 ◽  
Vol 9 (4) ◽  
pp. 1504-1520
Author(s):  
Tuğba Güneş ◽  
Ayşen Apaydın
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Mortgage Market ◽  
Mortgage Loan ◽  
Response Analysis ◽  
Mortgage Loans ◽  
Macroeconomic Factors ◽  
Mortgage Interest ◽  
Mortgage Interest Rates ◽  
Turkish Lira

This paper investigates the impacts of several macroeconomic variables on Turkey's volume of mortgage loans. Johansen cointegration test, vector error correction model, Granger causality tests, variance decomposition, and impulse-response analysis is employed for the econometric analysis to show short and long-run relationships between the variables using time series monthly data from January 2010 to March 2020. Paper results demonstrate that growth of housing credit size negatively correlates with mortgage interest rates, US Dollar/Turkish Lira exchange rate and level of real estate supply. At the same time, there is a positive correlation with house prices. Causal relationships between mortgage volume and macroeconomic indicators are bidirectional for all variables, except for mortgage interest rates. There is a one-way causality relationship from mortgage rates to mortgage loan volume. Econometric analyses show that the recent steep depreciation in the Turkish Lira hurts the Turkish mortgage market. In conclusion, a stable economic environment is essential to build a robust mortgage market.

scholarly journals DETERMINANTS OF MORTGAGE LOAN REPAYMENT IN GHANA

2021 ◽  
Vol 3 (4) ◽  
pp. 75-89
Author(s):  
Justice Agyei Ampofo ◽  
Isaac Mantey
Keyword(s):  
Interest Rates ◽  
Low Income ◽  
Occupational Status ◽  
Mortgage Market ◽  
Mortgage Loan ◽  
Primary Data ◽  
Mortgage Loans ◽  
Loan Repayment ◽  
Mortgage Industry ◽  
The Government

The housing deficit in Ghana is an issue of concern for all. This study sought to analyse the determinants of the repayment of mortgage loans in Ghana. The study used both secondary and primary data. The mixed-method approach was used for the study. The data collection instruments were interviews, focus group discussions and questionnaires. The study revealed that socio-demographic characteristics of respondents, sex distribution of respondents, educational level of respondents, marital status of respondents, occupational status of respondents, household size of respondents, the income of respondents are some of the factors that affect the repayment of mortgage loans in Ghana. The study revealed that borrowers who earned higher income had a better repayment performance as compared to low income earning borrowers. In addition, higher household sizes have lower repayment capacity and lower household sizes have higher repayment capacity. The study recommends that the government of Ghana should institute state bodies responsible for providing liquidity to mortgages and mortgage properties and buying mortgages during periods of rising interest rates is a way of creating a secondary mortgage market for the Ghanaian mortgage industry. Keywords:  Determinants, Mortgage, Repayment, Ghana.

scholarly journals Simulasi Penghitungan Online Kredit Pemilikan Rumah Bank Xyz Berbasis Web di Portal Finansial www.kontan.co.id

2013 ◽  
Vol 4 (1) ◽  
pp. 190
Author(s):  
Albert V. Dian Sano
Keyword(s):  
Interest Rates ◽  
Web Application ◽  
Mortgage Loan ◽  
Fixed Rate ◽  
Online Application ◽  
Mortgage Interest ◽  
Mortgage Interest Rate ◽  
Adjustable Rate ◽  
Adjustable Rate Mortgage ◽  
Fixed Rate Mortgage

The objective of this study is to develop an online application of mortgage loan simulation. This application is developed based on a web application in order to be accessible anywhere and anytime. This application is expected to help prospective property’s consumers calculate their financial plans related to decisions concerning the amount of down payment, loan term, and the mortgage system model to be selected. There are two models of mortgage in this application. The first is a fixed and cap rate of interest, with the first three years of the mortgage interest rate of 9.75%, the fourth and fifth year interest of 10%, and the sixth year onwards using a rate cap interest with the indication of 12%. The second model is a 2-year fixed rate mortgage with the first two years rate of 8.5% and the third year onwards using adjustable rate mortgage of interest with the indication of 12%. Calculation formula and the interest rates in this application are obtained from Bank XYZ which is in turn applied in collaboration with financial portal www.kontan.co.id. This application has been tested by over 1000 users and the results are well proven and valid.

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