Comparation And Selection Between ARM And FRM On Prepayment In China Housing Mortgage Market

China Everybright Bank launched the fixed rate mortgage product as the first bank who did that at 5th January 2006,this attracted great attention in the financial market. The direct enticement of this reformation is the dissension on the mass of prepayment an penalties which was conduced by the single rate system of mortgage with the concomitance of durative increase of mortgage interest rate.On the basis of classic microeconomics theory, this paper analyzes the characters of the market under the three mortgage rate systems respectively, and the counterpart model of which are built subsequently, so the comparison analysis of market efficiency between them and relative advices are induced from that. In these model, the quantity of prepayment and rate of penalties are a pair of variable in the market, to ask for the result of which, all the analysis are begin with the demand curve and supply curve. As a result of equilibrium and efficiency analysis, we find that the mixed mortgage rate system is prior to single mortgage rate system. Back to the real market in China, we can find some effective measure to solve the target problem.