Mortgage systems and the adaptation of mortgage system in Turkey : analyzing the housing loans

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2010
Çobandağ, Melike
An efficient housing finance system has significant importance both in meeting the housing needs of individuals and in reinforcing the development of the construction, finance and other related sectors of an economy. Today, developed countries have advanced housing finance systems in which funds flow from savers to home-buyers by the mortgage markets. On the other hand, despite its recognized economic and social importance, housing finance often remains under-developed in developing countries mainly due to the lack of macroeconomic stability. Turkey, being a developing country, has made an important step towards the development of a mortgage system with the passage of the new Mortgage Law by the Parliament. Accordingly, the purpose of this thesis is to examine the applicability of mortgage system in Turkey. For this purpose, housing finance systems of some developed and developing countries are reviewed, and the housing finance system in Turkey is explained. Further, causality between the total amount of housing loans issued, inflation and nominal interest rates in Turkey is analyzed with the Toda-Yamamoto VAR approach. VAR analysis shows the negative impact of nominal interest rates on the total amount of housing loans issued in Turkey. To sum up, considering its economic and social environment, Turkey has adapted best international experiences, and it is possible for a mortgage system to develop in the country by the new mortgage legislation combined with the lower interest rates as inflation declines.