Housing Policy and Mortgage Finance in Turkey During the Late 1990s Inflationary Period

Abstract

This paper evaluates the Turkish government’s housing policy for financing the public sector housing and examines the desirability of wage-indexed payment mortgage (WIPM) contract from the lenders perspective. The WIPM contract introduced in 1998 differs from the standard index-linked mortgages in that it is based on the Civil Servant’s Wage Index and there is no amortization rate. From the lender’s perspective, the WIPMs are found to be desirable mortgage instruments in periods of persistent high inflation because they eliminate the real interest rate risk and credit risk of the ARM and the ‘wealth risk’ of a nominal FRM.
 

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