Study On Influential Factors Of Mortgage Loan In Mongolia

Nowadays mortgage interest rates for home loans are emerging issues in Mongolia. The rapideconomic development has triggered an increasing demand for considerable long-term financialinvestments for constructing the house and purchasing buildings and structures in the country.Due to excessive demand, the housing prices are highly increased recently, which means onlyfew people can afford to buy apartment. In the prevailing circumstances the main goal of thecountry is-the formation of an effective functioning system to provide affordable housing forlow and middle-income households. To solve the housing issues of low-and middle-incomehouseholds in Mongolia, we should follow the successful experience of developed anddeveloping countries by evaluation of their existing system of mortgage lending to elaboratepractical recommendations for the development of the mortgage lending system, and investigatethe problems related with the usage of the mortgage lending system for crediting housingdevelopment. The present study demonstrated the mortgage lending in Ulaanbaatar and the keyfactors having impact on economy of Mongolia, comparative analysis of capital’s medium andlow-income households and methods. Also research based on household income as an influentialfactor of mortgage loan, and relationship between mortgage loan and housing price. By usingdata from Mongolia, Engle-Granger and Johansen Cointegration tests was applied to find if thereis a short and/or a long term relationship between demand for mortgage loans and housing prices.This study finds that there is a strong positive long run relationship between demand formortgage loans and housing prices in Mongolia. It also finds that the increases in salary andpension do not result in the increases in inflation so that the Government could increase thehousing demand by decreasing interest rates, increasing mortgage loan terms and supporting lowand medium income households by provisions of grants.This work has performed a complex evaluation and comparison of the mortgage lending systemsoperating in Scandinavian countries, USA, and from developing countries like Chile, Mexico,India and Malaysia and has evaluated their applicability for the development of the mortgagelending system in Mongolia. The present research indicated a comprehensive evaluation ofeconomic, financial, social and legal aspects of the Mongolian mortgage lending system,including evaluation and classification of the factors affecting its development. The author alsosuggested valuable recommendations concerning the use of mortgage lending for crediting housing, establishment of the state guarantee system, and development of financial instruments.The results of the study showed that Mongolia needs to solve number of questions such as,increase salary and pension for low income householders but increase should not be a reason forinflation, to decrease bank interest rate and seek ways to prolong it, the government should givegrant to support low and medium income householders, the government should supportconstruction companies via decreasing taxation to decrease apartment price.