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How do Interest Rate Changes Affect Mortgage Curtailments? Evidence from China
Author(s) -
Kuang Weida,
Liu Chunlin,
Wu Qun,
Zeng Hongchao
Publication year - 2021
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12285
Subject(s) - interest rate , economics , lag , affect (linguistics) , china , point (geometry) , floating interest rate , econometrics , renminbi , monetary economics , mathematics , exchange rate , geography , computer science , computer network , linguistics , philosophy , geometry , archaeology
Abstract This study uses a unique data set of adjustable‐rate mortgages in China to investigate the effect of interest rate changes on mortgage curtailments. A distributed lag model shows that on average, the cumulative curtailment over four months increases by about RMB 1,856 in response to a 1 percentage point increase in interest rates. Further analyses show that the degree of responsiveness of mortgage curtailments depends on the direction of the interest rate changes: curtailments are more responsive to interest rate increases than to decreases. We also find significant heterogeneity in borrowers’ curtailment responses.