A study of mortgage prepayment risk

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As recently as five years ago the average tenure of a residential mortgage in the UK was around seven years. Most lenders will tell you that the equivalent figure today is nearer four, due mainly to consumers’ increased willingness to switch lender for a better deal. This is a worrying trend for lenders since, because of the high costs of acquiring a mortgage, mortgages typically need to remain on the books for several years in order to be profitable.