Banks make profits from the difference between short-term and long-term loan interest rates. To issue loans, banks raise funds from capital markets. Since the long-term loan rate is relatively stable, but short-term interest is usually variable, there is an interest rate risk. Therefore, banks...

Long-term fixed-rate mortgage contracts protect households against interest rate risk, yet most countries have relatively short interest rate fixation lengths. Using administrative data from the UK, the paper finds that the choice of fixation length tracks the life-cycle decline of credit risk...

Two recent articles by Hancock and Passmore (2016) and Passmore and von Hafften (2017) make several suggestions for improving the home mortgage contract to make homeownership more achievable for creditworthy borrowers. Though the proposals in the two papers differ in some aspects, one common...