Mortgage innovations fuelled pre-crisis housing boom – paper

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A rise in mortgage innovations – such as teaser rates, interest-only loans or negative amortisation periods – helped fuel the rise of house prices in the decade before the financial crisis, researchers find in a paper published by the Federal Reserve Bank of Chicago.

Jane Dokko, Benjamin Keys, and Lindsay Relihan use data on more than 60 million loans and house price indexes for 1,163 US counties to examine the use of non-traditional mortgage products from 1993–2007.

They find that in counties

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