Press Release: The Future of Housing Finance

Author(s): Armstrong, A, Davis, P Published: 03rd November 2014

*Please note that due to publishing rights, these research articles will only be available from the NIESR website from Wednesday 5 November.* 

The Future of Housing Finance: A Special Issue of the National Institute Economic Review

EMBARGOED until 00.01 Tuesday 4 November

Issue no. 230 of the National Institute Economic Review is a Special Issue on the “Future of Housing Finance”. It includes five research articles which examine the importance of housing finance to financial intermediation and financial stability in the light of recent experience, and which consider appropriate reform for the future.

The research is based on presentations given at a NIESR conference held at the Bank of England on 12 September 2014, where leading experts from around the world discussed key issues in this area. The conference benefited from financial support from the ESRC, Money Macro and Finance Group, and Centre for Macroeconomics.

The articles explore inter alia whether the global house price and lending boom was the key factor underlying the recent financial crisis; the importance of the interaction between financial innovations and the housing market; the changing market structure of securitisation and the US housing bubble; distinctive features of the national system of housing finance in Canada; and a comparison of mortgage systems in the UK and Denmark.

The research is of considerable importance because housing finance was at the epicentre of the global financial crisis. It raises a variety of risks which change over time and are notoriously difficult to manage, including credit, interest rate and market risk and mortgage pre-payment risks. The welfare consequences of these risks are particularly important because house buying is usually the largest financial transaction households make, and the cost of housing means that they cannot usually hedge their exposures to these risks.

As recent events have shown, housing finance is also central to financial intermediation and stability. Innovation may have increased the supply of housing finance but it may also have heightened the concentration of risks, putting financial institutions at risk of failure.

There is an extraordinarily diverse set of national models of housing finance. It is natural to ask which one is best, whether they can be transferred across national boundaries and how to undertake reform. In the UK, housing finance policy was under review prior to the crisis; in the US there is an unfinished conversation about the government sponsored enterprises, and in Continental Europe the role of covered bonds has come under scrutiny. Many regulatory issues at both micro-prudential and macro-prudential level are wide open.

Key issues in this context are addressed by the articles, authors of which are from the University of Pennsylvania, Bank of Canada, Imperial College London, Nykredit and NIESR.


The articles are as follows:

Comparing Housing Booms and Mortgage Supply in the Major OECD Countries

By Angus Armstrong and E. Philip Davis (NIESR)

Financial Innovations and the Stability of the Housing Market

By Franklin Allen (University of Pennsylvania; Imperial College London), James R. Barth (Auburn University; Milken Institute) and Glen Yago (Milken Institute)

The Market Structure of Securitisation and the US Housing Bubble

By Susan Wachter (University of Pennsylvania)

Housing Finance in Canada: Looking Back to Move Forward

By Lawrence L. Schembri (Deputy Governor, Bank of Canada)

Mirror, Mirror, Who is the Fairest of Them All? Reflections on the Design of and Risk Distribution in the Mortgage Systems of Denmark and the UK

By Jesper Berg and Christian Sinding Bentzen (Nykredit)



For full copies of these papers, journalists please contact the NIESR Press Office: Brooke Hollingshead on 020 7654 1923 / b.hollingshead [at]   

To discuss any of the articles please contact the respective researcher.

The National Institute Economic Review is a quarterly journal of NIESR. Published in February, May, August and November, it is available from Sage Publications Ltd ( at subscription [at]    

The latest economic forecasts for this issue of the National Institute Economic Review are to be released on Tuesday 4 November, embargoed for 00.01 Wednesday 5 November. Details of the press conference, where the forecast researchers can answer any questions, can be found here.

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