ABSTRACT
A mortgage is simply a loan contract which specifies a rule for determining the interest rate applying in any year to the debit balance then outstanding, called hereafter the debiting rate. Clearly, there are many issues which will have to be dealt with in the transition to new mortgage lending patterns. The alternative to the traditional mortgage that has received by far the greatest attention and already has been adopted in some parts of the country is the variable-rate mortgage (VRM). The essential characteristic of the VRM is that the debiting rate charged on the borrower's outstanding balance is not fixed at the outset but is allowed to float up or down, being tied to some agreed "reference rate. The VRM in any form still fails to resolve and at least to some extent would worsen what we have called the demand effects of inflation, namely the capricious changes in initial level of payments due to inflation-swollen interest rates.
