Mortgages and housing affordability: an analytical note

Improving housing affordability is one of the priority tasks of socio — economic development. Often the decline in mortgage rates is considered as a key instrument in this task. However, the main factor improving the affordability of housing should be high and sustained income growth, rapid growth in housing prices, noted in a research note , “the mortgage and housing affordability”.

As shown by the study authors to reduce mortgage rates opportunities exist. One of the ways — part of the interest payments due to the budget through various benefit programs. This measure will improve the availability of mortgages without negative consequences for price and financial stability.

However, the ability of mortgages to improve housing affordability is not unlimited. The experience of many countries shows that an excessive decline in interest rates has the opposite effect — higher prices for housing and reduce its availability.

Improving affordability of housing can help to reduce construction costs, the authors of the study. Additional possible solutions to the “housing question”, in their opinion, can provide the development of the secondary housing market and long term rental.

12 Mar 2020