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Essay / Research Paper Abstract
This 5 page paper answers questions set by the student. The question considers why mortgage lenders do not see significantly improved profits from their fixed-rate loans when interest rates decrease. The second part of the paper considers what to link, if any, exists between mortgage rates and long-term treasury rates. The first question looks at the secondary mortgage market, the levels of activity in the way in which it differs from other capital markets. The bibliography cites 5 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEmortqu1.rtf
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Unformatted sample text from the term paper:
time investors wish to tie their money up in the period of time over which burrows require learners. The financial institutions are able to act as a financial intermediary taking
the numerous short and medium-term investments, in which they pay interest, using them on aggregated basis to low-income borrowers, who pay interest on funds they have borrowed. The mortgage lender
makes its primary profit with the difference between the interest rates are paid by the borrowers, and the interest which is paid out to the investors. It may appear that
where interest rates decrease, and a borrower has a fixed-rate mortgage, that the mortgage company is likely to see an increased profit, as the costs decrease on variable investments, was
a revenues remain the same from the fixed-rate mortgage repayments. However, evidence does not appear to support this assumption. The favourable impact
is dampened by a number of factors; the first is the way in which the mortgage market operates (Flannery, 1981). Many mortgage lenders make loans, and then they will sell
on the interest to in the mortgages, secondary mortgage market. It has also become a thriving market in mortgage bonds. If this is the case then the benefit of the
underlying profit will be transferred to the bond owners. Where does loans are sold on, in whatever form, the proceeds from the loans and then used to make more mortgages.
Therefore, if a lender has chosen to sell the mortgage on they have already taken a profit and sold new mortgages to take their place using the revenue the initial
cell created. Mortgage lenders will not always self mortgages on. In many cases where fixed-rate mortgages have been offered there will be linking
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