Mortgage Markets in the United States of America and Europe

The authors provide a brief overview of the char acteristics of the different housing financing sys tems of the two continents. The varying, but everywhere important role of housing in house hold savings is analysed separately as well. At the same time, they point out the interdependence between the factors of modern money based upon credit and the wealth effect that can be related to housing. Finally, they highlight the thoughts – sta ble savings rate, liquidity, rational housing policy – that should, perhaps, be considered by the Hungarian financial policy-makers as well. It is common knowledge that there is a sig nificant difference between the financial sys tems of the Old World and the New World. Capital market financing is more developed and therefore more decisive in America, while bank financing continues to be typical in Europe. Data for 2007 make it perfectly clear: the capital market amounted to 375 per cent of GDP in the United States of America, and only to 311 per cent in the euro area. At the same time, stock market capitalisation equalled 165 per cent of GDP in the United States of America, but it reached only a mere 81 per cent in the euro area. The underlying reason is that Europe traditionally prefers bank financing, where a relatively high ratio of household sav ings and the financing of the operation of com panies mainly from loans are typical. The ques ion arises whether the usual, established diver gent financial structures and institutional sys tems influence today’s economic developments in individual regions, and if so, how and through what transmissions.