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Evidence on the benefits of alternative mortgage products

Journal

Journal of Finance

Subject

Finance

Publishing details

Journal of Finance 2013 Vol 68:4 p 1663-1690

Authors / Editors

Cocco J

Biographies

João Cocco

Publication Year

2013

Abstract

Alternative mortgage products have been identified by many as culprits in the financial crisis. However, because of their lower initial mortgage payments relative to loan amount, they may be a valuable tool for households that expect higher and more certain future labor income, and that wish to smooth consumption over the life-cycle. Using U.K. household-level panel data, this paper provides evidence in support of this hypothesis and highlights other important benefits of alternative mortgages, including portfolio diversification, tax benefits, and a reduction in the transaction costs incurred in housing transactions.

Available on ECCH

No


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