Capital Requirements, Mortgage Rates and House Prices

2021 ◽  
Author(s):  
Sven Damen ◽  
Stef Schildermans
Keyword(s):  
House Prices ◽  
Capital Requirements ◽  
Mortgage Rates

Uneven US housing recovery is vulnerable to many risks

2017 ◽  
Keyword(s):  
New York ◽  
San Francisco ◽  
Global Financial Crisis ◽  
House Prices ◽  
Washington Dc ◽  
Content Type ◽  
Housing Recovery ◽  
Mortgage Rates ◽  
The Global Financial Crisis ◽  
Private Homes

Subject US housing outlook Significance US housing starts are growing at a rate of around 1.2 million private homes per year, double the pace during the worst of the global financial crisis but far below the rate of 2 million homes a year in 2004-05. House prices are still growing steadily though, passing the pre-crisis peak late last year and gaining around 5% since then. Impacts San Francisco, Boston, Seattle, Dallas and Denver prices are over 20% higher than the pre-crisis peak, making them vulnerable to correction. New York, Washington DC, Chicago, Miami and Tampa are earlier in the cycle; prices remain at least 20% below the pre-crisis peak. The foreclosure rate is below 0.60% in every state but could turn around quickly if political instability or mortgage rates rise rapidly.

scholarly journals Highly Liquid Mortgage Bonds Using the Match Funding Principle

2019 ◽  
Vol 10 (01) ◽  
pp. 2050001
Author(s):  
Jens Dick-Nielsen ◽  
Jacob Gyntelberg
Keyword(s):  
Trading Volume ◽  
House Prices ◽  
Capital Requirements ◽  
Market Liquidity ◽  
Main Concern ◽  
Government Bonds ◽  
Creditor Rights ◽  
Funding Liquidity ◽  
Pass Through ◽  
Bid Ask Spreads

We show that pass-through funding of mortgages with covered bonds supported by strong creditor rights is one way of providing highly liquid mortgage bonds. Despite a 30% drop in house prices during the 2008 crisis, these mortgage bonds remained as liquid as comparable government bonds with high trading volume and low bid-ask spreads. Market liquidity of these covered bonds is primarily driven by the availability of funding liquidity. Funding liquidity is the main concern because the pass-through funding approach effectively eliminates other types of risks from the investor’s perspective. Banking regulators should take into account the implications of these findings, particularly when it comes to the interplay between liquidity and capital requirements.

scholarly journals How Mortgage Finance Reform Could Affect Housing

2016 ◽  
Vol 106 (5) ◽  
pp. 620-624 ◽  
Author(s):  
John V. Duca ◽  
John Muellbauer ◽  
Anthony Murphy
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Capital Requirements ◽  
Finance Reform ◽  
Fannie Mae ◽  
Mortgage Finance ◽  
Mortgage Interest Rates ◽  
Size Limits ◽  
Loan Size ◽  
The Impact

Although major changes in mortgage finance have occurred since the subprime bust, several issues remain unresolved, centering on the roles of Fannie Mae, Freddie Mac, and the FHA. We analyze how some reforms might affect house prices in a framework rich enough to simulate the impact of several reforms which change mortgage interest rates and/or loan-to-value (LTV) ratios of first time home buyers, the key drivers of house prices in recent decades. Simulations suggest that ending the GSE interest rate subsidy would have small effects, while changes in capital requirements or maximum FHA loan size limits would have larger effects.

A Macroeconomic Model of Price Swings in the Housing Market

2019 ◽  
Vol 109 (6) ◽  
pp. 2036-2072 ◽  
Author(s):  
Carlos Garriga ◽  
Rodolfo Manuelli ◽  
Adrian Peralta-Alva
Keyword(s):  
Financial Markets ◽  
House Prices ◽  
Housing Prices ◽  
The United States ◽  
Housing Finance ◽  
Macroeconomic Model ◽  
Quantitative Version ◽  
House Values ◽  
Mortgage Rates ◽  
Positive Effect

This paper shows that a macro model with segmented financial markets can generate sizable movements in housing prices in response to changes in credit conditions. We establish theoretically that reductions in mortgage rates always have a positive effect on prices, whereas the relaxation of loan-to-value constraints has ambiguous effects. A quantitative version of the model under perfect foresight accounts for about one-half of the observed price increase in the United States in the 2000s. When we include shocks to expectations about housing finance conditions, the model’s ability to match house values improves significantly. The framework reconciles the observed disconnect between house prices and rents since, in general equilibrium, financial shocks can decrease rents and increase prices. (JEL E44, G21, R31)

scholarly journals Interest Rate Pass-Through: Mortgage Rates, Household Consumption, and Voluntary Deleveraging

2017 ◽  
Vol 107 (11) ◽  
pp. 3550-3588 ◽  
Author(s):  
Marco Di Maggio ◽  
Amir Kermani ◽  
Benjamin J. Keys ◽  
Tomasz Piskorski ◽  
Rodney Ramcharan ◽  
...  
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Housing Wealth ◽  
Balance Sheets ◽  
Marginal Propensity To Consume ◽  
Marginal Propensity ◽  
Mortgage Rates ◽  
Relative Decline ◽  
Adjustable Rate ◽  
Pass Through

Exploiting variation in the timing of resets of adjustable-rate mortgages (ARMs), we find that a sizable decline in mortgage payments (up to 50 percent) induces a significant increase in car purchases (up to 35 percent). This effect is attenuated by voluntary deleveraging. Borrowers with lower incomes and housing wealth have significantly higher marginal propensity to consume. Areas with a larger share of ARMs were more responsive to lower interest rates and saw a relative decline in defaults and an increase in house prices, car purchases, and employment. Household balance sheets and mortgage contract rigidity are important for monetary policy pass-through. (JEL D12, D14, E43, E52, G21, R31)

scholarly journals France

2019 ◽  
Vol 19 (241) ◽  
Author(s):  
Keyword(s):  
Financial Stability ◽  
House Prices ◽  
Action Plan ◽  
National Level ◽  
Solvency Ii ◽  
Capital Requirements ◽  
High Yield ◽  
Banking Union ◽  
Green Finance ◽  
Asset Quality

Important institutional and policy changes have taken place since the 2012 FSAP. At the national level, the authorities have strengthened the macroprudential framework by establishing the High Council for Financial Stability (HCSF), enhanced monitoring of financial stability risks, prepared to manage the Brexit fall-out, introduced macroprudential measures, and taken various financial reform measures included in Loi PACTE—Action Plan for Business Growth and Transformation—and initiatives on digital finance, crypto-assets, green finance, and combating cyber risk. At the European level, significant changes include the Banking Union (BU), Capital Requirements Regulation/Capital Requirements Directive (CRR/CRD), Solvency II, and efforts towards a Capital Markets Union (CMU). The financial system is more resilient than it was in 2012. Capital positions and asset quality have improved. Banking business is better placed to handle cross-border contagion, including from exposures to high-yield EA economies. Insurers’ solvency ratios have been stable and have been bolstered by the effective implementation of Solvency II. Household savings and balance sheets are relatively sound and house prices presently appear broadly aligned with fundamentals.

scholarly journals DO INFLATION, INTEREST RATE AND COST OF RENTING AFFECT THE PRICE OF TERRACE HOUSES IN PENANG?

2020 ◽  
Vol 18 (13) ◽  
Author(s):  
Zaemah Zainuddin ◽  
Rosylin Mohd Yusof
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Multivariate Regression ◽  
House Prices ◽  
House Price ◽  
Multivariate Regression Analysis ◽  
Middle Income ◽  
Rental Rate ◽  
Mortgage Rates ◽  
The Cost

In Malaysia, the housing ownership is reported to decrease from 85% in 1999 to 72.5% in 2010. This is due to the outstripped increase of house price over the income level and the unstable economic situation which creates unaffordability to own a house for many people. Therefore, the main objective of this study is to examine whether the price of terrace houses in Penang is being affected with fundamental factors such as inflation, interest rates and the cost of renting. This study uses multivariate regression analysis with quarterly data of terrace house prices (HPI terrace house in Penang), inflation (CPI) and interest rate (mortgage rates) from 2009: Q1 to 2016: Q4. Evidently, the cost of renting terrace houses in Penang does not have any impact on the price of terrace houses and the stable movement of cost of renting indicates that the growth of rental rate is at acceptable price for middle income earners.

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