Abstract
In this note, the choice of mortgage instrument in an inflationary environment was analyzed. Using Federal Home Loan Bank data on the proportion of loans closed as variable-rate mortgages for the period 1981 to 1987, it was found that higher anticipated inflation held with certainty increased this proportion, while greater inflation uncertainty in the sense of a Diamond-Stiglitz mean-preserving spread decreased this proportion. That is, homebuyers appear to prefer fixed-rate mortgages in the presence of inflation uncertainty and to reject lender efforts to shift interest-rate risk through variable-rate mortgages.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
