Premature repayment of fixed interest mortgage loans without compensation, a case of misguided consumer protection in the EU

Consumer protection shifts risks from consumers to businesses. This raises marginal costs and equilibrium prices. It is justified when markets are not strong enough to allocate contractual risks or accident risks efficiently, especially in cases of severe asymmetric information between suppliers and consumers. Consumer protection can then increase the consumer’s expected welfare from a contract. We test these considerations in a theoretical and empirical study on consumers' right to early repayment of mortgage loans without damage compensation to the creditor in the European Union. We show in a formal model that such a right can lead to an impairment of consumer welfare, compared with the traditional rule of expectation damages for breach of contract. This applies if the consumer is risk averse and repays a loan with a high interest rate in a low interest period to take up a new loan for the same project at lower interests. From a theoretical point of view, this right has no solid economic underpinning, if it is not restricted to cases of personal hardship of the consumer and serves an insurance purpose. We present empirical evidence supporting this argument. In a panel study on monthly mortgage interest rates of 23 EU Member States between 2005 and 2017 we show how interest rate spreads change with the level of consumer protection.

Modern monetary theory for the post-pandemic NHS: why budget deficits do not matter

NHS clinical directors are responsible for balancing departmental budgets, which can encompass staffing, equipment and operating theatres. As trust income is generally fixed, expenditure reduction is often attempted via recurrent cost improvement plans. In orthodox monetary theory, a departmental deficit contributes first to the hospital, then to the NHS, then to the national deficit. In the orthodox view, governments in deficit need to increase taxes and/or borrow money by issuing bonds (akin to mortgage loans), the interest on which is paid off for generations. Modern monetary theory offers a different perspective: government deficits do not matter as much as orthodox theory claims, if at all. This is because governments have the monopoly right to create the money in which the deficit is denominated (so do not ever need to borrow something that they can create). Therefore governments cannot default on debt in their own currency. Furthermore, government deficits equate to private surplus. This new perspective should influence microeconomic budget management at the clinical director level: the new emphasis being to deliver value and not just implement local savings to eliminate departmental deficits. This approach will become increasingly important in managing the huge surgical waiting lists that have accumulated during the COVID-19 pandemic.

Development of Tools for Synergy of Social Functions of the State and Housing Mortgage Loans in Russia: Regional Analysis of the Central, Southern and Volga Federal Districts

The article researches the features of the synergy of the social functions of the state and the housing mortgage loan (HML) in order to develop a tool that allows determining guidelines and directions for strengthening the effectiveness of collaboration between the state and the private sector represented by commercial banks in solving the most important social problem—providing housing to the population. The authors show that the use of the proposed assessment tool by state structures and commercial banks increases the effectiveness of solutions to the housing problem in the country and enhances the synergetic effect of a comprehensive increase in the standard of living of the population when synchronizing actions. The main purpose of the research was to develop an algorithm that determines the key factors influencing the number of issued HML. The object of the study is the Russian HML market on the example of three federal districts. The developed algorithm is based on the use of statistical analysis methods ANOVA, mutual regression and recursive feature elimination. The approbation of the results obtained on three subjects of the Russian Federation allowed us to obtain a set of significant factors of influence, taking into account regional peculiarities.

Mathematical Models for Calculation of the Parameters of the Bank and the Borrower in the Mortgage Lending

The article covers the consideration of the issues of analysis and development of mathematical models to improve the efficiency of the mortgage lending system. The relevance of the study is due to the fact that the current mechanisms of mortgage lending in Russia do not correspond to global trends: by interest rates level; in terms of the volume of loans issued and other conditions. However, it is one of the main tools that allows to improve the population’s living conditions and, as a result, to release the socio-economic tension caused by this factor, as well as to attract additional input in the investment and construction sector, which in modern conditions is one of the most important problems. As a result of the research carried out, the article offers a mathematical model for calculating the parameters of the bank and the borrower, in order to form the most acceptable conditions for the loan. In the mathematical model, such parameters of the borrower and the lender as the price of the apartment, the percentage of the down payment from its price, the mortgage loan rate, the total debt and the loan term, as well as the share of the borrower's income allocated to monthly payments are interconnected. This model will allow the bank to determine the most suitable loan conditions regarding the payment amount, term, and available credit limit, and the borrower to calculate the parameters of the loan in order to make an informed decision on attracting it. All this, in the end, will allow banks to reduce the level of risk on issued mortgage loans, and the borrower — confidence in the ability to pay off the mortgage loan.

Mortgage volume and macroeconomic factors: Evidence from Turkey

This paper investigates the impacts of several macroeconomic variables on Turkey's volume of mortgage loans. Johansen cointegration test, vector error correction model, Granger causality tests, variance decomposition, and impulse-response analysis is employed for the econometric analysis to show short and long-run relationships between the variables using time series monthly data from January 2010 to March 2020. Paper results demonstrate that growth of housing credit size negatively correlates with mortgage interest rates, US Dollar/Turkish Lira exchange rate and level of real estate supply. At the same time, there is a positive correlation with house prices. Causal relationships between mortgage volume and macroeconomic indicators are bidirectional for all variables, except for mortgage interest rates. There is a one-way causality relationship from mortgage rates to mortgage loan volume. Econometric analyses show that the recent steep depreciation in the Turkish Lira hurts the Turkish mortgage market. In conclusion, a stable economic environment is essential to build a robust mortgage market.

DETERMINANTS OF MORTGAGE LOAN REPAYMENT IN GHANA

The housing deficit in Ghana is an issue of concern for all. This study sought to analyse the determinants of the repayment of mortgage loans in Ghana. The study used both secondary and primary data. The mixed-method approach was used for the study. The data collection instruments were interviews, focus group discussions and questionnaires. The study revealed that socio-demographic characteristics of respondents, sex distribution of respondents, educational level of respondents, marital status of respondents, occupational status of respondents, household size of respondents, the income of respondents are some of the factors that affect the repayment of mortgage loans in Ghana. The study revealed that borrowers who earned higher income had a better repayment performance as compared to low income earning borrowers. In addition, higher household sizes have lower repayment capacity and lower household sizes have higher repayment capacity. The study recommends that the government of Ghana should institute state bodies responsible for providing liquidity to mortgages and mortgage properties and buying mortgages during periods of rising interest rates is a way of creating a secondary mortgage market for the Ghanaian mortgage industry. Keywords: Determinants, Mortgage, Repayment, Ghana.

The Effect of Global Financial Crisis and Ethiopian Monetary Policy Measures: Review on the pre-and post-crisis scenario

Policymakers and leaders usually fail to grasp a sound lesson from the eco- nomic hurdles and crises countries face. This paper, thus, is intended to review and articulate the causes and effects of the global financial crisis, and how the Ethiopian monetary policy reacted and mitigated the crisis. The data for the analysis were collected from various sources including IMF, World Bank, National Bank of Ethiopia, and research articles from 2003 to 2019. The review reveals that even during the crisis in 2009, Ethiopia was among the top five fastest-growing countries in the world by an average of 10.5%, which is twice the average growth of Sub-Sahara African countries (5 %). It had become the seventh-largest economy in Africa and the 69th in the world with a GDP PPP of 118.2$ Billion as of 2013. Some of the main reasons for the con- tinued growth of the country amid crisis could be the desynchronization of the country’s financial market with the international financial market, an insig- nificant share of mortgage loans in domestic financial sector services, and high-level government-led infrastructure investment coupled with China’s economic alliance. However, the significant effect of the crisis was observed in the country’s exports, remittance, and Foreign Direct Investment (FDI). To shun the related inflationary effect, the government increased the minimum deposit interest rate, reserve, and liquidity requirements, and reinstated the credit restrictions. Also, the immediate alert was given to commercial banks to give proper attention in managing credit risk and reducing non-performing loans to below 5% and overdraft facilities. Given the above-mentioned facts, the monetary policy measures were effective to stabilize the economy & sus- tain the growth. In the end, the offshoots & setbacks of the unsynchronized financial market, government-led investment & fettered mortgage loans are addressed, and the way forward is marked out.

Non-mortgage loans in the Chinese residential real estate market

Purpose From January 2021, the potential flow of Chinese household non-mortgage loans, including business loans and short-term consumption loans to the residential real estate market, has attracted the attention of the regulatory authorities. This study aims to examine the effects of household non-mortgage loans on the Chinese residential real estate market. Design/methodology/approach Based on a monthly data set between July 2011 and December 2019, this study adopts a cointegration analysis. Findings This study finds that household non-mortgage loans do play a significant role in driving residential real estate prices in China. Originality/value While many studies have examined the Chinese real estate market and its linkage with the financial system and the economy, this study is the first of its kind in the academic literature that exclusively focusses on the role of non-mortgage loans in real estate prices, and makes an original contribution.

FINANCIAL SUPPORT AND EFFICIENCY OF IMPLEMENTATION OF GOVERNMENT HOUSING ACCESSIBILITY PROGRAMS IN UKRAINE

The state of financial support of seven state programs of housing affordability, which currently operate in Ukraine, has been studied and analyzed. As a result, the most effective programs in terms of state aid and the average amount of state aid per recipient were identified. The main significant shortcoming in the implementation of state programs for housing affordability is their constant underfunding from the state budget, which hinders the manifestation of a synergistic positive effect. Deficit of budget funds and restrictions or complete refusal to allocate budget allocations to finance state support for housing affordability programs for various categories of the population negatively affect the state of development of the residential real estate market in Ukraine. This constrains both the demand and the supply of housing due to the lack of financial resources to cover the existing investment needs both at the construction stage and during the sale of already built residential real estate. The multiplier effect from the implementation of state programs of housing affordability on the revival of the real estate market by attracting citizens’ own funds to the construction industry is determined. The priority mechanisms for providing housing to Ukrainians are outlined: mortgage loans at 7% per annum with a down payment of 15% of the cost of housing and financial leasing at 5% without down payment, which are aimed primarily at supporting the population of Ukraine and strengthen protection of interest’s citizens. There is a need to improve financial and credit instruments that overcome the problem of lack of financial resources for the real estate market and help to quickly create the necessary residential real estate, taking into account the strategic interests of all participants — individuals (investors), developers, banks and non-bank financial institutions, state and local authorities, as well as local communities. Keywords: financial support, state program, investment projects, financial and credit instruments, mortgage loans, financial leasing, residential real estate market. JEL Classification G21 Formulas: 0; fig.: 1; tabl.: 1; bibl.: 10.

Residential House Prices, Commercial Real Estate Lending and Bank Failures

We investigate factors leading to bank failures during and after the Great Recession and banking crisis (2008–2015). The FHFA residential real estate house price index (HPI) for each of the 9 Census regions is used to interact with bank mortgage loans and bank financial statement variables. We find that these variables isolate different regional effects on the likelihood of a bank failing. Since we use changes from region to region, we find that regional location and HPI changes have an effect on banks’ commercial lending activity. Other more traditional and associated factors, like construction and land development lending or multifamily real estate lending, similarly explain bank failures during the main period of the banking crisis. By using this approach we better isolate the relationship between residential house prices and builders’ and land developers’ desire to borrow and the willingness of banks to concentrate portfolio lending in commercial real estate.