Adjustment Interval

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Adjustment Interval

In adjustable-rate mortgages and variable-rate mortgages, the time between two changes in the interest rate of the mortgage or loan. Often, the adjustment interval lasts one year, but some loans change rates as often as once a month or as seldom as every five years. The shorter the adjustment interval, the higher the financial risk is for the homeowner. For example, if the adjustment interval for a mortgage is one month, a homeowner's mortgage payment could increase every month for five months or longer before it decreases again. This ties up more of the homeowner's income, and increases the likelihood of default.

Adjustment Interval

On an ARM, the time between changes in the interest rate or monthly payment.

These are the same on a fully amortizing ARM, but may not be on a negative amortization ARM. See Adjustable Rate Mortgage.

References in periodicals archive ?
This percentage drops to below 23% when the discount factor is restricted to reasonable values, and under these restrictions, industries accounting for at least 36% of all sales in the industries we analyze have estimated price adjustment intervals of less than 2 quarters.
Numerous theoretical contributions to the burgeoning sticky-price literature likewise appeal to the lengthy estimated price adjustment intervals forthcoming from applications of the Gali-Gertler empirical methodology as justification for the assumption of generalized price stickiness.
For 59 industries accounting for about 8% of all industries' sales in 2004, the price adjustment intervals implied by the unrestricted non-hybrid model's estimates were negative, implying an obvious mismatch of these industries with the structural model.
The unweighted average price adjustment intervals for these groups of industries were 18.
95, the fit of the model for 84 industries was very poor and yielded negative estimated price adjustment intervals.
99 restriction slightly reduced both the unweighted and the weighted average estimated price adjustment intervals across all industries to 3.
The only broad industry grouping for which estimated price adjustment intervals are consistently relatively longer than those of other categories is the transportation (48) category.
Figure 2 displays a breakdown of unweighted average estimated price adjustment intervals (again, adjustment periods computed using an unweighted average of estimates of [theta] across industries within each group) at the three-digit NAICS level for industry subgroupings within manufacturing industries.
Table 2 presents a summary of the results for the hybrid specifications of the New Keynesian model (in which the numbers of deleted industries with negative price adjustment intervals obtained from the unrestricted, [beta] = .
Columns (2) and (3) of Table 2 show that for the restricted hybrid specifications, the overall unweighted and weighted averages of estimates of price adjustment intervals are between 0.
Adjustment intervals typically range from one month to five years.
Another concern among servicers is the higher unit-servicing costs anticipated for ARMs, especially those with negative amortization, short adjustment intervals and the relatively few that have adjustable servicing fees.