What are three benefits that came from the development of th

What are three benefits that came from the development of the secondary mortgage market?

Solution

First of all let’s understand the meaning of secondary mortgage market. In simple terms the secondary mortgage market allows banks to sell mortgages to investors such as pension funds, insurance companies and the federal government. The returns give the banks new subsidize to offer more home loans. There are also secondary markets in other kinds of debt, as well as stocks. Most important is the secondary market for U.S. Treasury bills, bonds and notes. Demand for these Treasuries affects all interest rates. When demand for Treasuries is high, then interest rate yields can be low for all debt. When demand for Treasuries is low, then interest rates must rise for all debt on the secondary market.

Benefits:-

Misfortunes coming about because of real changes in contract loan costs. The level of benefit strength - managed by supporting will he assessed diversely by singular firms. Firms in a profoundly utilized position may wish the security offered by supporting certain exchanges while different less utilized firms might be more disposed to go for broke of an unhedged position.

2. Another social benefit should result from a mortgage futures market, including somewhat lower average mortgage interest rates, slightly lower effective housing prices, and less volatility of mortgage interest rates.

3. In a free market setting it appears that social costs will be outweighed by the benefits accruing to society. Although the benefits may be sizable from society’s viewpoint, individual home buyers cannot expect to see a significant drop in housing costs.