TIME TO DEFAULT IN THE UK MORTGAGE MARKET

This paper employs duration analysis to investigate the timing of defa ult in the UK mortgage market. Our analysis is performed on an ex ante basis, in that our explanatory variables are available to mortgage le nders when the loan is first made. We estimate both standard Weibull d istributions and generalizations of the Weibull that permit non-monoto nic hazard functions. The models fit the data well, suggesting that we have captured the major sources of variation in duration. We find tha t 'cash flow' variables, such as salary and interest rate paid, play t he largest role. Surprisingly, loan-to-value ratios are either insigni ficant or influence default times in a counter-intuitive direction. (C ) 1997 Elsevier Science Ltd.