Analyzing the Causal Relationships Between Financial Crises and the Residential Mortgage Market

Abstract

Subject. We consider the economic relations, arising in the process of the analysis of the financial and economic state of the housing (mortgage) loan market during crises. Objectives. The aim is to conduct a study within the practical concept of financial crises and the residential mortgage market, to identify cause-effect relationships. Methods. We apply analytical and expert methods, based on the analysis of residential mortgage market data and the activities of the Agency for Housing Mortgage Lending. Results. The study determines the segmented role of digitalization of the banking sector in the system of State programs intended to support the residential mortgage market. We reveal causal relationships between financial crises and the residential mortgage market on the basis of a factor analysis. Conclusions. During 2008 and 2014, the government regulation of the banking crisis was only through changing the level of the key rate. It resulted in an increase in interest rates and a decrease in demand for mortgage loans, as affordable mortgage interest rates still remain the main driver of mortgage lending for citizens. This scenario gives rise to a stagnation of the residential mortgage lending market and, consequently, a very long recovery period. In contrast to the scenario of 2020, where we see an active growth in mortgage lending against the background of the financial crisis, the reason was the implemented set of measures that triggered the growth and formed a safety cushion for the banking sector in the form of secured lending.