The Effects of Interest Rates on Mortgage Prepayments.

The article examines the effects of interest rates on mortgage prepayments in the U.S. Studying this subject is important due to the financial condition of saving and loan and saving bank institutions in the U.S. Mortgages which are due on sale and have fixed interest rates are key players in a bank's portfolio and, because of this, their economic net worth depends on the effective or expected maturity of these assets. Data on 3,938 California mortgages active in 1975 and 1976 was collected and then those mortgages were followed through to 1982.