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Mortgage Prepayment Behavior in a Market with ARMs Only Authors: Jia He and Ming Liu Start Page:
64 Abstract:
A
study on the prepayment behavior of Hong Kong mortgage loans is
conducted. With all of the loans as adjustable-rate mortgages (ARMs),
we find that 1) Prepayment speeds up and then slows down as the mortgage
seasons; 2) Prepayment speeds up as the rate markup decreases; 3)
Prepayment speeds up as the interest rate increases; 4) Prepayment
speeds up when the profitability ratio of the banks ( the prime-HIBOR
spread) is higher; 5) Prepayment speeds up as the price of the property
market falls; 6) Prepayment speed is faster for loans with a lower loan-to-value
ratio; 7) Prepayment exhibits a seasonal pattern: people tend to prepay
in the summer.
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