6533b834fe1ef96bd129d533
RESEARCH PRODUCT
A comment on mortgage procylicality
Trond-arne BorgersenKarl Robertsensubject
Rate of returnEconomics and EconometricsCollateralEconomicsFinancial systemMortgage underwritingRegime shiftBusiness and International ManagementShared appreciation mortgageMortgage insuranceMarket liquidityCredit riskdescription
This paper comments on mortgage procyclicality. A framework for credit constraints along the lines of Kiyotaki and Moore (1997) is applied to illustrate a potential regime shift in the credit risk assessments of mortgagees. Depending on the relationship between house price growth and the alternative rate of return the weight given to collateral and debt-servicing ability may vary according to the house price cycle as mortgagees engage in search-for-yield. The regime shifts induced by increased global liquidity and expectations of continued housing appreciation might stimulate owner-occupation and LTV-ratios and induce mortgage procyclicality.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2012-01-01 | Global Business and Economics Review |