The Implementation of 8% Mortgage Policy and its Challenges: Mongolia

Abstract

As Mongolians move from a nomadic culture to urbanization, housing issues are becoming more acute as the process of rural-to-urban migration and settlement intensifies. In line with this, the Government of Mongolia and the Central Bank of Mongolia have been jointly implementing the "Sustainable Mortgage Financing System Program" since June 2013 to support households with lower and middle incomes and improve the life quality of their citizens. This mortgage loan policy has been in place for the last eight years, yet it is still questionable whether this policy is serving its primary objective. Hence, the motivation behind this thesis work was to look into the applicability of the mortgage loan system and the accessibility of borrowers. More specifically, this paper aims at finding out the potential challenges that the program is facing in terms of customer service and loan adequacy. The paper used a mixed-method for its analysis. The study research design uses cross-sectional mixed methods to extract results from a semi-structured questionnaire. The OLS model was used to analyze the loan applicability based on the primary data collected through an online survey of people with long-term mortgage loans. Apart from the regression results, the qualitative component of the study has shown issues related to bank loan procedures and ongoing program implementation. The study is also intended to provide policy recommendations on the determinants impacting the level of mortgage loans at the governmental and regulatory levels, with the goal of addressing Mongolia's housing shortage and preserving a stable, competitive mortgage system. One of the key findings of the study indicates that removing the 30% down payment will not have a positive impact on the predicted mortgage loan, but rather will have a negative effect on it. Further studies are needed to identify specific macroeconomic factors affecting the effectiveness of the program.