Local authority residential mortgage credit: A source of non-market sub-prime homeloans for low-income households

Dermot Coates
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Abstract

As the volume of mortgage credit has risen in tandem with house price inflation, the sub-prime homeloan sector of this market has begun to expand in order to meet demand from those not serviced by the mainstream financial service providers. This article examines the role of local authorities in providing residential mortgages and assesses whether those who have traditionally borrowed from non-market (or public sector) lenders would be considered to be sub-prime borrowers by the private sector. It concludes that, in view of the relatively low average incomes of this cohort of borrowers, they represent a higher probability of homeloan default and as a consequence, would be subject to a higher cost of credit in the private sector. However, this paper highlights the favourable terms offered by local authorities and argues that their failure to price according to the risk profile of borrowers exposes the Exchequer to higher – and often unquantified – costs in pursuit of promoting home-ownership.
地方政府住房抵押贷款:为低收入家庭提供非市场次级住房贷款的来源
由于抵押贷款的数量随着房价的上涨而上升,这个市场的次级住房贷款部门已经开始扩大,以满足那些没有得到主流金融服务提供商服务的人的需求。本文考察了地方当局在提供住房抵押贷款方面的作用,并评估了那些传统上从非市场(或公共部门)贷款机构借款的人是否会被私营部门视为次级借款人。报告的结论是,鉴于这批借款人的平均收入相对较低,他们拖欠住房贷款的可能性较高,因此,私营部门的信贷成本较高。然而,本文强调了地方当局提供的有利条件,并认为他们未能根据借款人的风险状况进行定价,这使财政部在追求促进住房所有权的过程中面临更高的成本——而且往往是无法量化的成本。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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