The Feasibility of Estimating the Demand

for Residential Mortgage Credit in Poland

17

Table 2

Comparison of Interest Rates and Inflation, 1996   1998

Type of Rate 

Date

Level (%)

Inflation

9/96

19.5

(Consumer Price Index, annual rate)

9/97

13.6

9/98

10.6

Treasury Bill Rate (52 week) 

9/30/96

19.43

9/29/97

23.20

9/28/98

15.81

11/9/98

13.65

Bank 12 Month Deposit Rate (min/max)

9/96

17.2/20.5

9/97

16.5/22.1

7/98

13.0/21.0

Mortgage Lending Rate

1996

28 to 30

1998

23 to 25

The impact that these types of factors might have on the use of traditional models

of demand, and some suggestions for modifying the models to be more realistic for Poland,

are discussed in section 4.0 and in annex I, which illustrates how such barriers might

impact the design and estimation of formal models.

3.0

THE GOALS AND METHODOLOGIES OF ALTERNATIVE TYPES OF HOUSING

DEMAND AND MORTGAGE CREDIT STUDIES

3.1

A Compendium of Models

The demand for mortgage credit is one part of a complex decision making process

with many interrelated aspects.  In the first instance, the demand for mortgage credit is in

part a function of the demand for housing.  Underlying the demand for housing is a series

of decisions with regard to the probability of moving; the choice of tenure (own or rent); the

demand for other goods, particularly consumer durables; and other choices regarding

financial assets in the household's portfolio.  Enveloping all of this are decisions being

made over time the so called life cycle approach to savings and consumption in which

housing, as the main asset of most households, plays a pivotal role.

15

The following list offers one type of simple categorization of the models:

15

See, for example, Paul Courant, Edward Gramlich, and John Laitner,  A Dynamic Microeconomic

Estimate of the Life Cycle Model,  and Sally Merrill,  Home Equity and the Elderly  (which discussed the life cycle

model specifically for housing), both in 

Retirement and Economic Behavior, 

Henry Aaron and Gary Burtless, eds.

The Brookings Institution, 1984.