Mortgage credit rationing in other economies

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The study of mortgage rationing and its removal has been of interest in countries other than the UK and the US. For example, Deutsch & Tomann (1995) noted the tight collateral rules obtaining in Austria and Germany. The application of a maximum 75% loan-to-value ratio minimises default risk but restricts access to owner occupation for low-income groups. A study of Australia by Bourassa (1995), estimated a tenure choice model incorporating a direct measure of rationing, income, wealth and the comparative cost of homeownership and renting. The methodology followed Linneman & Wachter (1989). Bourassa found that measures of rationing reduce the effect of income and relative cost variables suggested that these might have acted as proxies for mortgage market rationing in previous studies.

Moriizumi (2000) considered the case of public corporations in Japan. These corporations lend to individuals for house purchase at low interest rates, but apply credit limits. Thus a household wishing to exceed the credit limit must then borrow from the private banking system. The work again followed the procedure of Linneman & Wachter. Rationed and non-rationed samples are formed and parameter estimates derived from switching regression analysis. Households who do not top up their borrowing from private banks are assumed not to be rationed. Once again the results of the study emphasises that housing and mortgage demand equations that do not explicitly account for rationing criterion will produced biased coefficient estimates.

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