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A Variable-Rate Loan-Prepayment Model for Australian Mortgages

Author

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  • John Daniel

    (School of Finance and Applied Statistics, Australian National University.)

Abstract

This paper is an investigation of Australian mortgage-loan prepayment from a modelling perspective. A prepayment model for loans of mortgage-backed securities is developed specifically for the Australian mortgage market, and then empirically tested using (Reuters) Australian mortgage-backed security data. The model has origins in the variable-rate loan-prepayment models of the U.S., but is designed and developed to take into account the Australian mortgage-market structure. The model proves very successful when tested empirically, and is able to explain the partial-prepayment features of the Australian market as well as full prepayments.

Suggested Citation

  • John Daniel, 2008. "A Variable-Rate Loan-Prepayment Model for Australian Mortgages," Australian Journal of Management, Australian School of Business, vol. 33(2), pages 277-305, December.
    • Handle: RePEc:sae:ausman:v:33:y:2008:i:2:p:277-305
    DOI: 10.1177/031289620803300204
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    Cited by:

    1. Patel, Nimesh & Daglish, Toby, 2011. "Fixed come hell or high water? Selection and prepayment of fixed rate mortgages outside the US," Working Paper Series 4107, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    2. Liang, Te-Hsin & Lin, Jian-Bang, 2014. "A two-stage segment and prediction model for mortgage prepayment prediction and management," International Journal of Forecasting, Elsevier, vol. 30(2), pages 328-343.

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