alexa Does a Rise in Mortgage Interest Rate Necessarily Incre
ISSN: 2162-6359

International Journal of Economics & Management Sciences
Open Access

OMICS International organises 3000+ Global Conferenceseries Events every year across USA, Europe & Asia with support from 1000 more scientific Societies and Publishes 700+ Open Access Journals which contains over 50000 eminent personalities, reputed scientists as editorial board members.

Open Access Journals gaining more Readers and Citations

700 Journals and 15,000,000 Readers Each Journal is getting 25,000+ Readers

This Readership is 10 times more when compared to other Subscription Journals (Source: Google Analytics)

Research Article

Does a Rise in Mortgage Interest Rate Necessarily Increase the Burden of Buying a House?

Ben David Evyatar1, Ben David Nissim2* and Sabbah-Amar Anne3

1Department of Economics, Tel Aviv University, Israel

2Department of Economics and Management, Emek Yezreel Academic College, Israel

3Department of Management (Finance), Aix-Marseille University, France

*Corresponding Author:
Ben-David Nissim
Department of Economics and Management
Emek Yezreel Academic College
Emek Yezreel 19300, Israel
Tel: 972-4-6398847
Fax: 972-4-6291452
E-mail: [email protected]

Received date February 22, 2016; Accepted date February 29, 2016; Published date February 29, 2016

Citation: Evyatar BD, Nissim BD, Anne SA (2016) Does a Rise in Mortgage Interest Rate Necessarily Increase the Burden of Buying a House?. Int J Econ Manag Sci 5: 324. doi:10.4172/2162-6359.1000324

Copyright: © 2016 Evyatar BD, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

 

Abstract

In this paper, we demonstrate that although the housing price and house price-to-income ratio can undergo a very large rise, the burden of repaying a mortgage might decrease due to a reduction in the interest rate. In order to check if burden on house buyers increases or decreases, we suggest calculating and depicting "equal repayment curves". These curves represent a borrower's equal periodical repayment given that house prices and mortgage interest rates vary. The curves enable us to compare the burden of buying a house during a certain time period compared to a bench mark point in time. Using Israeli data, we calculated a house price indexed to income and showed that although nominal house prices during the period 2003:1-2011:4 increased by more than 66%, the burden on house buyers did not increase. These results contradict the idea held by many that reducing the interest rate necessarily makes buyers worse off due to increased house price-to-income ratio.

Keywords

Share This Page

Additional Info

Loading
Loading Please wait..
 
Peer Reviewed Journals
 
Make the best use of Scientific Research and information from our 700 + peer reviewed, Open Access Journals
International Conferences 2017-18
 
Meet Inspiring Speakers and Experts at our 3000+ Global Annual Meetings

Contact Us

 
© 2008-2017 OMICS International - Open Access Publisher. Best viewed in Mozilla Firefox | Google Chrome | Above IE 7.0 version
adwords