An Empirical Study of Adjustable Rate Mortgage Indexes with Reference to US Economy

Abstract

Two types of financial contracts are prevailing in the market between lender and borrowe1; conji1sing the customers to opt either of them.for their advances. Choice of/ow initial rate is preferred by the borrower who want to match their low cash inflow in initial years to cash outflow in the.form of payment of interest and principal. Whereas customer is sure about fix interest rates because installments are known to him and he makes cash arrangements accordingly. Situation is opposite in the case of variable rate mortgages asfinancial institutions change the rate to interest according to market conditions and mitigate interest rate risk. This paper analyses adjustable rate mortgage with treaswy bill, inflation and GDP growth