Resources: Newsletter Articles: Mortgages Outside The U.S.

Congress' long-standing commitment to homeownership has resulted in a well-developed secondary mortgage market that meets the needs of both home buyers and investors by providing a continual flow of money Ð liquidity Ð for Americans seeking to purchase homes. Specifically, the secondary market has:

• Increased the homeownership rate to a record level of 68 percent,
• Lowered mortgage rates and saved interest payments,
• Made home mortgages readily available,
• Eliminated regional interest rate disparities,
• Reduced the effect of regional economic downturns,
• Expanded the variety of mortgage loan products,
• Reduced the costs and time of obtaining mortgage loans, and
• Attracted investors from national and global capital markets.

Such benefits are not global. Other nations have realized the benefit of the secondary mortgage market and are seeking to replicate it. Here are some quick looks at how things work in other countries:

• Whenever there is a rate change in the U.K., mortgage companies review the borrower's interest rate and decide whether to impose a new one.
• In France, the lack of an appraisal system results in down payments of as much as 40% . Investors rely on borrower credit rating and capacity to pay rather than the value of the property.
• Due to high housing costs, Germany, the largest economy in Europe, has a homeownership rate of only 40%. Prepayment is prohibited on fixed-term loans, and down payments are typically 35 to 40%.
• In Mexico, interest rates have fluctuated widely, with banks refusing to lend. Down payments average 40%.
• In Italy, the average down payment is 50%.
• In Japan, down payments average 50 to 60%.
• In Canada, rollover mortgages have a fixed rate during the first one to five years, with a prepayment penalty equal to three months of interest.

U.S. homeownership is now at almost 68%.

sherrybenninger@grubbco.com

The GRUBB Co., 1960 Mountain Blvd., Oakland, CA 94611

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