The determinants of mortgage yield spread differentials: Securitization

This paper examines securitization and mortgage yield spread differentials among four groups of Australian mortgage providers: mortgage corporations, commercial banks, building societies and credit unions. The dataset includes over 2000 observations of standard adjustable rate mortgages from 180 ins...

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Bibliographic Details
Published in:Journal of multinational financial management 2005-10, Vol.15 (4), p.314-333
Main Authors: Liu, Benjamin, Skully, Michael
Format: Article
Language:English
Subjects:
Asymmetric information
Australia
Banks
Credit market
Empirical tests
Financial systems
Information asymmetry
International capital market
International finance
Mortgage lenders
Mortgages
Profitability
Securitization
Yield spreads
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Summary:This paper examines securitization and mortgage yield spread differentials among four groups of Australian mortgage providers: mortgage corporations, commercial banks, building societies and credit unions. The dataset includes over 2000 observations of standard adjustable rate mortgages from 180 institutions. Several studies on the impact of securitization (e.g., reduced funding costs, information costs, agency costs, regulatory tax and improved mortgage marketability and liquidity) can be found, but there is a little empirical evidence, particularly in an Australian context. Our results suggest that mortgage corporations that securitize all their loans have both the narrowest nominal and effective yield spreads among the four groups, consistent with the existing securitization and mortgage cost literature. The regression findings also indicate that both minimum and maximum amounts of loans are significantly associated with spreads.
ISSN:1042-444X
1873-1309
DOI:10.1016/j.mulfin.2005.04.003