Turkish mortgage market: An assessment of its potential and riskiness

Thesis Type: Doctorate

Institution Of The Thesis: Orta Doğu Teknik Üniversitesi, Faculty of Economic and Administrative Sciences, Department of Economics, Turkey

Approval Date: 2015


Supervisor: EBRU VOYVODA


This thesis is the first attempt to provide a comprehensive evaluation of the Turkish mortgage market in terms its potential within the European region, the main risks of mortgage termination through default and prepayment decisions of the borrowers, and finally the current mortgage market policies applied by the national policy makers. The present research, firstly, uses a macroeconomic perspective and investigates the development potential or the depth of the Turkish market in comparison with 31 European countries by using a rich panel-data set. Secondly, it follows a microeconomic approach and uses the reduced-form models, which use loan-level data, evaluates the default and prepayment risks simultaneously and assesses the effectiveness of various policy choices that affect Turkish mortgage market. In addition, loan-level data also enables assessing the product and borrower level changes in the market in recent years. Main conclusions of this thesis are; Turkish mortgage market has a significant growth potential which is fueled by the factors such as growing economy, increasing population and urbanization trend, default risk is low in the Turkish mortgage market and default risk related policy choices are excessively tight and the level of prepayment risk is very high. The results of this thesis is expected to contribute both to the literature on mortgage markets and to the decision making processes of the national policymakers.