Housing finance in an integrating Europe
Finland’s housing finance system is extremely bank-centred compared to other Western European countries. Over 80 percent of housing finance consists of bank loans, which is more than in any other EEA country. It is clear that the changes in financial markets brought about by integration will also affect the terms and conditions of housing finance in Finland in many ways. Financial market integration is expected to lead, sooner or later, to financial systems in different countries beginning to resemble one another in terms of interest rate levels, product ranges, and institutional structures. For Finland, this could mean, for example, that the role of banks in housing finance diminishes, financing alternatives increase, and the product range diversifies. The speed and intensity of such changes depends, however, substantially on market structure. If barriers to entry are high and markets are monopolistic, the effects of integration will be slower and more limited than in the opposite case.
Consideration of housing finance alternatives is also warranted by the fact that Finland’s banking system has fallen into a serious financial crisis, and some banks are able to continue operating only with the support of the state. In these circumstances, it is appropriate to ask whether housing finance in the 1990s can still rely on bank lending to the same extent as before, and what other viable alternatives exist for organising housing finance. A functioning financial system is a prerequisite for the development of housing conditions, which is in turn an important element in the competition for educated labour in the integrated Europe of the coming decades.
The aim of this study is, firstly, to produce information on how housing finance is currently organised in the countries of Western Europe: what role different types of financial institutions and the state play in the provision of housing finance, what techniques are used in financial intermediation, and what housing finance products are available to consumers in different countries. A second aim is to compare the operating practices and efficiency of different types of housing finance institutions and systems, and on this basis to assess their ability to withstand increasingly intense international competition in the integrating financial markets of Western Europe. Thirdly, in the light of developments that have already taken place in housing finance markets in Western Europe and the USA, the aim is to assess the future trends in housing finance in Europe in the 1990s. (AI translation)
- ISSN: 1236-7176
- ISBN: 951-9282-68-8
