Institutional disparities in the pricing of adjustable rate mortgage loans

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


In recent years, commercial banks and savings and loan associations in South Florida have consistently offered initial adjustment period "teasers," or subsidies, on their adjustable rate mortgage loans (ARMs). This study adopts the size of the initial subsidy as a proxy for a lender's willingness to offer ARM loans and develops an econometric model which relates the size of the teaser to a series of internal variables (other lending parameters), and external variables (financial market conditions). The results suggest that subsidization policies are not identical across institutions. Specifically, savings and loan associations seem to be less willing than commercial banks to accept the interest rate exposure inherent in ARM lending when future loan rates are constrained by adjustment limits. Consequently, the study argues that the character of a lender's existing assets influences its reactions to the risk/return properties of new assets.

Original languageEnglish (US)
Pages (from-to)31-45
Number of pages15
JournalThe Journal of Real Estate Finance and Economics
Issue number1
StatePublished - Feb 1 1989


  • Adjustable Rate Mortgage
  • Teaser
  • Variable rate loan

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Urban Studies


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