What the Consumer Expenditure Survey Tells us about Mortgage Instruments Before and After the Housing Collapse
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Wilson, Taylor J.
[Excerpt] This Beyond the Numbers article focuses on the effects of the housing market collapse on mortgage composition among consumers who were mortgage holders. The purpose of a mortgage loan is to allow a consumer to purchase a property by borrowing against future income at a price (the interest rate). There is, of course, inherent risk associated with taking out any loan, but the amount of risk depends on the terms of the contract reached between the lending institution and the consumer. The article uses data from the Consumer Expenditure Interview Survey (CE) to describe how the composition of mortgage contracts changed between 2004 and 2014. Following are the main findings: Activity in the mortgage market fell after the collapse in the housing market. After the collapse, consumers moved away from risky mortgage instruments in favor of less risky ones, both as a percentage of all mortgages taken out and in absolute terms. Fixed-rate mortgages (FRMs) are much more popular than the non-fixed-rate alternatives, regardless of the period examined. Consumers tend to prefer longer term mortgage contracts.
housing market collapse; mortgage composition; Consumer Expenditure Survey; CES