ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon Print

Morgan and Zhang: Asian home lending a source of stability

 (placeholder image)
A rise in the number of mortgage loans reflects greater access by households to the formal financial system.   © Reuters

Financial sectors in Asian economies are dominated by banks, so maintaining their financial stability is crucial. Domestic banking crises often originate in the real estate sector -- the subprime crisis in the United States in 2007 to 2010 was only the most recent example. Therefore, one might conclude that mortgage lending is negative for financial stability.

     However, in normal periods, mortgage lending may contribute to financial stability. This is because mortgage loans have different risk properties from assets such as commercial loans, so mortgage loans in a mixed portfolio tend to diversify banks' risks. Also, individual mortgage loans are small, which means they do not contribute much to systemic risk, except in periods of real estate bubbles.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more