Mortgage Markets in Central and Eastern Europe – A Review of Past Experiences and Future Perspectives

The collapse of the former Soviet Union and the subsequent transition process has transformed the political, social and economic landscape in central and eastern Europe, the Balkans and Russia. Reforms of the existing regulatory and institutional framework have created the basis for continued economic expansion. The resulting rising incomes of households have become one of the main drivers for prosperous banking markets. To benefit from this positive trend, many banks have opted for an expansion into mortgage lending. The objective of this paper is therefore to analyse how these countries have managed to convert the positive economic development into better housing for their citizens (including the access to mortgage credit). The paper sets out the criteria which are considered essential for the development of primary mortgage markets and compares these with mortgage market development, starting with an outline of the situation before the beginning of the transition process, including an analysis of what has enabled the emergence of the mortgage markets and finishing by an overview of the present situation. The paper concludes with an assessment of the progress made since the start of the transition process, thereby providing an outlook for the further development of mortgage markets, in particular in view of the current turbulence in the international financial markets.