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Relative indicators of default risk among UK residential mortgages

Author

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  • Mitropoulos, Atanasios
  • Zaidi, Rida

Abstract

We have assembled a unique loan-level performance dataset for mortgages originated in the UK to study the differences in default likelihood between loans of varying borrower and loan characteristics. We can broadly confirm the relevance of most commonly known riskfactors and find that most drivers of default for prime are also relevant for non-conforming, drivers of repossessions are largely similar to drivers of arrears and information on adverse borrower information dominates any other risk factor. Our study provides many more details and compares results with recent studies for the US and other European countries.

Suggested Citation

  • Mitropoulos, Atanasios & Zaidi, Rida, 2009. "Relative indicators of default risk among UK residential mortgages," MPRA Paper 19619, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:19619
    as

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    File URL: https://mpra.ub.uni-muenchen.de/19619/1/MPRA_paper_19619.pdf
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    References listed on IDEAS

    as
    1. Brookes, Martin & Dicks, Mike & Pradhan, Mahmood, 1994. "An empirical model of mortgage arrears and repossessions," Economic Modelling, Elsevier, vol. 11(2), pages 134-144, April.
    2. Yuliya Demyanyk & Otto Van Hemert, 2011. "Understanding the Subprime Mortgage Crisis," The Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 1848-1880.
    3. John Whitley & Richard Windram & Prudence Cox, 2004. "An empirical model of household arrears," Bank of England working papers 214, Bank of England.
    4. Lambrecht, Bart & Perraudin, William & Satchell, Stephen, 1997. "Time to default in the UK mortgage market," Economic Modelling, Elsevier, vol. 14(4), pages 485-499, October.
    5. Christopher Mayer & Karen Pence & Shane M. Sherlund, 2009. "The Rise in Mortgage Defaults," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 27-50, Winter.
    6. Diaz-Serrano, Luis, 2005. "Income volatility and residential mortgage delinquency across the EU," Journal of Housing Economics, Elsevier, vol. 14(3), pages 153-177, September.
    7. Catarina Figueira & John Glen & Joseph Nellis, 2005. "A Dynamic Analysis of Mortgage Arrears in the UK Housing Market," Urban/Regional 0509006, University Library of Munich, Germany.
    8. Orla May & Merxe Tudela, 2005. "When is mortgage indebtedness a financial burden to British households? A dynamic probit approach," Bank of England working papers 277, Bank of England.
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    Cited by:

    1. Wei-Wen Wu & Jian-Fa Li & Cheng-Yih Hong, 2017. "Verifying the Determinants of the Mortgage Defaults on Home Mortgage," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 266-273.

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    More about this item

    Keywords

    residential mortgages; loan defaults; consumer behaviour; logistic regression; United Kingdom;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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