Prepayment Behavior of Dutch Mortgagors: An Empirical Analysis

E. Charlier, A. van Bussel

Research output: Working paperDiscussion paperOther research output

1083 Downloads (Pure)

Abstract

The booming Dutch mortgage market and the development of a promising secondary mortgage market in the Netherlands stress the need for an accurate mortgage prepayment model that incorporates typical Dutch market and contract characteristics.One of those typical Dutch features prescribes that each calendar year the mortgagor is allowed to prepay penalty-free 10 to 20 percent of the original loan amount.As a consequence, Dutch mortgagees suffer a loss when borrowers prepay their loans.This risk, once again, underlines the importance of a prepayment model that focuses on the Dutch market.To derive such model we use historical data on mortgages originated between January 1989 and June 1999.We estimate separate models for two popular redemption types: savings mortgages and interest-only mortgages.In both models we allow for suboptimal prepayment behaviour.The results clearly indicate that prepayment rates depend on interest rates and the age of the mortgage contract.Moreover, Dutch prepayment rates peak in the month December.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages34
Volume2001-64
Publication statusPublished - 2001

Publication series

NameCentER Discussion Paper
Volume2001-64

Keywords

  • mortgages
  • econometric models

Fingerprint Dive into the research topics of 'Prepayment Behavior of Dutch Mortgagors: An Empirical Analysis'. Together they form a unique fingerprint.

  • Cite this

    Charlier, E., & van Bussel, A. (2001). Prepayment Behavior of Dutch Mortgagors: An Empirical Analysis. (CentER Discussion Paper; Vol. 2001-64). Econometrics.