We study how the term structure of interest rates relates to mortgage choice, both at the household and the aggregate level. A simple utility framework of mortgage choice points to the long-term bond risk premium as theoretical determinant: when the bond risk premium is high, fixed-rate mortgage...

The fraction of newly-originated mortgages that are of the adjustable-rate (ARM) versus the fixed-rate (FRM) type exhibits a surprising amount of time variation. A simple utility framework of mortgage choice points to the bond risk premium as theoretical determinant: when the bond risk premium...

In this chapter, we review and discuss the large body of research that has developed over the past 10-plus years that explores the interconnection of macroeconomics, finance, and housing. We focus on three major topics -- housing and the business cycle, housing and portfolio choice, and housing...