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Mortgagor Motivations in Prepayments for Adjustable Rate Mortgages

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  • Seow–Eng Ong
  • Clark L. Maxam
  • Doreen Chze–Lin Thang

Abstract

This paper provides the first rigorous analysis of residential adjustable mortgage prepayment using individual ARM mortgage data in Singapore. The prepayment rate for residential mortgages is low and is dominated more by macroeconomic factors than mortgage–specific factors. Specifically, the prepayment rate is increasing in residential property prices, but decreasing in income as proxied by GDP and volatility in mortgage rates. There is weak evidence to suggest that prepayment is increasing in the borrower’s age, mortgage rate hikes, cash–availability variables and sentiments of the stock market, and decreasing in the price premium over valuation, payment–to–income ratio, loan–to–value ratio, loan term and floor level of the property.

Suggested Citation

  • Seow–Eng Ong & Clark L. Maxam & Doreen Chze–Lin Thang, 2002. "Mortgagor Motivations in Prepayments for Adjustable Rate Mortgages," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 14(2), pages 97-116, July.
    • Handle: RePEc:bla:revurb:v:14:y:2002:i:2:p:97-116
    DOI: 10.1111/1467-940X.00050
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    Cited by:

    1. Seow Ong & Tien Sing & Alan Teo, 2007. "Delinquency and Default in Arms: The Effects of Protected Equity and Loss Aversion," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 253-280, October.
    2. Nai Jia Lee, 2003. "Expected Return of Housing and Mortgage Termination," International Real Estate Review, Global Social Science Institute, vol. 6(1), pages 75-101.
    3. Lee, Nai Jia & Ong, Seow Eng, 2005. "Upward mobility, house price volatility, and housing equity," Journal of Housing Economics, Elsevier, vol. 14(2), pages 127-146, June.

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