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Housing appreciations and the (in)stable relation between housing and mortgage markets

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  • Trond-Arne Borgersen

Abstract

This paper highlights the knife-edge distinction between stable and instable relations between housing and mortgage markets. Housing appreciations and mortgage growth are related to housing market fundamentals and the interrelation between house prices and mortgage supply. These are again linked to debt-servicing ability and collateral, the two main components of a mortgagee's lending policy. The equilibrium relation between housing and mortgage markets is, while stable in scenarios where debt-servicing dominates, instable when collateral dominates the relation. The knife-edge that separates the regimes is a critical rate of appreciation and the accompanying critical leverage gain. Highlighting the knife-edge that separates these two well-known regimes, we provide a non-technical framework where conventional credit-risk assessments provide a rationale for macro-prudential policy.

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  • Trond-Arne Borgersen, 2016. "Housing appreciations and the (in)stable relation between housing and mortgage markets," International Journal of Housing Policy, Taylor & Francis Journals, vol. 16(1), pages 91-110, January.
    • Handle: RePEc:taf:intjhp:v:16:y:2016:i:1:p:91-110
    DOI: 10.1080/14616718.2015.1069080
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    Cited by:

    1. Trond-Arne Borgersen & Anne Wenche Emblem, 2022. "Mortgage Market Induced Booms and Busts in the Housing Market in a Modified DiPasquale-Wheaton Model," International Real Estate Review, Global Social Science Institute, vol. 25(3), pages 281-306.
    2. Lenarčič, Črt, 2022. "Drivers of household arrears: an euro area country panel data analysis," MPRA Paper 114558, University Library of Munich, Germany.

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