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Quantitative Finance · Glossary

What is Housing turnover, refinancing incentive?

Also known as: housing turnover · refinancing incentive

Definition 12.2 Rates, Credit, XVA and Risk · Chapter 12 — Mortgage Modelling

Housing turnover is the part of prepayment that comes from home sales, defaults and curtailments, rising with loan age to a plateau and insensitive to rates. The refinancing incentive is the pool’s weighted-average coupon (WAC) minus the mortgage rate a borrower could get today: refinancing is worth it when the incentive exceeds the costs of doing so.

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