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The Structural Relation Between Mortgage and Market Interest Rates

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  • Achla Marathe
  • Hany A. Shawky

Abstract

This paper analyzes the dynamic relationship between primary and secondary mortgage markets and the short‐term and long‐term market interest rates. Using a series of monthly data on fixed rate mortgage rates and GNMA rates, we explore the dependence and speed of adjustment in these primary and secondary mortgage rates to each other as well as to the long and short‐term government rates. The results indicate that residential mortgage rates in general, appear to follow the long‐term rate and are not very sensitive to movements in the short‐term interest rate.

Suggested Citation

  • Achla Marathe & Hany A. Shawky, 2003. "The Structural Relation Between Mortgage and Market Interest Rates," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(9‐10), pages 1235-1251, December.
    • Handle: RePEc:bla:jbfnac:v:30:y:2003:i:9-10:p:1235-1251
    DOI: 10.1111/j.0306-686X.2003.05110.x
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    References listed on IDEAS

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    Cited by:

    1. Geoff Willcocks, 2009. "UK Housing Market: Time Series Processes with Independent and Identically Distributed Residuals," The Journal of Real Estate Finance and Economics, Springer, vol. 39(4), pages 403-414, November.

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