Summary and conclusions

This introductory chapter has established the necessary background to the study of mortgage market economics. Mortgage markets are of obvious importance to the performance of national economies, the growth in owner occupation, and individual and household welfare. The development of the securitised mortgage market in the US has motivated an increasing amount of theoretical and empirical research into the mortgage choices of households. Though we must always keep in mind important institutional differences, variations in the efficiency of housing finance systems, and differences in mortgage contract design that obtain between countries, mortgage economics research has significantly advanced the understanding of household behaviour and mortgage choices. The choice set of mortgage contracts, and the choices made, give insight into the nature of a housing finance system, and the completeness and efficiency of capital markets. This book has these and other mortgage choices as its focus.

The major form of the empirical research discussed in this book will be cross-section studies of household decision making. Cross-section studies can give important insights into the nature of consumer behaviour and heterogeneous characteristics that are aggregated in time series studies. This book does not ignore important time series work, but does emphasise the theoretical and empirically based microeconomic foundations of mortgage market analysis. The book explores the themes of optimal mortgage contract design, rational financial calculations that impinge upon cash flows to the securitised mortgage market and the impact of capital market imperfections, liquidity constraints and information asymmetries. The reader who studies this book should gain an understanding of the importance, structure and key directions of mortgage market research, as well as a guide to research questions as yet unexplored, or in need of further investigation and analysis.

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