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Surrey Business School research included in 2013 Budget submission

Originally invented by Yale economist Professor Robert Shiller, the Continuous Workout Mortgage is a new type of home loan that automatically reduces monthly payments when house prices decrease.

In his 2013 paper Mitigating financial fragility with Continuous Workout Mortgages, Surrey Business School researcher Dr Rafal M. Wojakowski – in conjunction with his co-authors, Professor Shiller, Professor Shahid Ebrahim and Professor Mark Shackleton – proposes a comprehensive valuation method of this type of mortgage.

In their HM Treasury 2013 Budget Submission, London-based firm Quantum Alpha advocated a limited form of Continuous Workout Mortgage to protect British homeowners’ mortgage balances against house price declines. By making mortgages safer for both lenders and borrowers, this new approach has the potential to increase confidence within the business community, reduce the risk of future systemic crises and lay the foundation for sustainable house price levels.

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