The implications of mortgage finance on housing market affordability

Abstract

Purpose -The downturn in the residential housing market in Northern Ireland (NI) has been the most pronounced of any UK region, with house prices contracting circa 40 per cent between 2007Q3 and 2009Q4. The downturn at first glance appears to have increased the "ability to afford" however this is nonetheless a "false dawn". Significant deposit levels coupled with a more prudent lending culture has ensured that housing affordability remains a primary policy concern. The purpose of this paper is to empirically analyse the interrelationships between mortgage liquidity and housing affordability in NI during the boom-bust cycle in the residential property market. Design/methodology/approach -The paper analyses mortgage-lending statistics for NI in the period 1993-2009, using time series panel data. House price data are drawn from the University of Ulster House Price Index over the same time series. To facilitate analytical interpretation and outcome analysis, quantitative evaluation is applied within a first-time buyer (FTB) affordability framework. Findings -This study finds that the relationship between mortgage finance and affordability has been driven by deregulation of the mortgage market contributing to the rise in house prices and affordability pressures during the market up cycle. More recently, ongoing liquidity constraints within the financial sector are impairing recovery in the residential property market culminating in heightened concerns of both purchase and "deposit gap" affordability. The key findings suggest that the new significant capital requirement needed to access the housing market will inevitably prolong affordability pressures for the foreseeable future. Originality/value -This paper contributes to affordability debate in two ways. First, it examines the effect of both liberalised and contracted patterns of mortgage finance on affordability and argues that conventional approaches appear to present a "false dawn" for FTBs in NI. Second, the paper demonstrates that affordability post-financial crisis has shifted in genre towards a purchase and deposit gap (lag time) issue.

Factor Affecting the Housing Financing of Bumiputera in Iskandar Malaysia

“…Most of the housing policies around the world are more concerned with housing needs compared to housing demand. One of the measurements used by the bank in determining whether a person can repay the loan is the amount of the monthly payment that should not exceed one-third of the total income [16]. If the amount of the monthly payment is low, then the period of repayment of the entire loan term is longer and the interest to be paid is also high, and this affects the financing.…”

An Analysis of Professional Perceptions of Criteria Contributing to Sustainable Housing Affordability

“…Literature proposes that there is an increasing need to gain a more encompassing understanding of housing affordability [14,18,25]. Housing affordability is not a one-dimensional concept and should not be analysed using just one concept, measure or definition [46,47]. To assist in creating more affordable and also more sustainable communities the authors also postulate that it is important to move away from defining housing affordability as a purely monetary issue.…”

Comparative analysis of MCDM methods for the assessment of sustainable housing affordability

“…The Housing affordability is a complex and multi-dimensional issue. Accordingly, to gain a better insight into the problem, it should not be analysed using just one concept, measure or definition [26,27]. It is clearly difficult, perhaps impossible, to address all concerns related to affordability within one simple measure.…”

“…physical quality, location and access to services and appropriateness may need to be addressed by additional complementary indicators [12]. McCord et al [27] elucidate that a one measure fits all approach to assessing affordability is problematic and policy makers must consider more than one measure when reforming policy instruments. Despite these findings, research often continue to focus on economic criteria alone as the basis of housing affordability assessments [7][8][9][10], with little regard for what households get in return for what they spend on housing in terms of housing location and neighbourhood characteristics.…”