line, but also being below the structural penetration line. We also find reliance on retail funding retains a mortgage finance system below the structural penetration line.

The correlations in Table 12 also point to several public policy areas which can help the mortgage market beyond the structural depth and penetration lines. More developed insurance sectors and stock markets are associated with mortgage depth moving beyond the structural depth line, as are stronger creditor rights and a more effective credit information sharing system. There is also evidence that the use of wholesale funding and mortgage bonds as second most important funding source for the mortgage market is associated with mortgage systems moving beyond their structural depth line. Overall, many of these correlations are in line with the regression results of Section 3, with the notable exception of funding sources.

# **5. Conclusions and Looking Forward**

This paper presented new data on mortgage depth and penetration across countries. We related this cross-country (and time-series in the case of Mortgage Depth) variation to variation in different socio-economic, policy and mortgage market specific variables. We also used an established benchmarking exercise to compare actual values of mortgage market development to values predicted by structural country factors.

We find a large variation across both dimensions of mortgage market development, both across countries but also—in terms of depth—within countries. Mortgage markets seem to develop only at relatively high levels of GDP per capita. Policies associated with financial system development are also associated with mortgage market development, including price stability and the efficiency of contractual and information frameworks. We find that the development of the insurance sector and the stock market, sources of long-term funding, is strongly associated with mortgage market development, while government subsidies and support are not. Similarly, the benchmarking exercise shows a large variation across countries and over time in the gap between predicted and actual values in mortgage depth and penetration.

Our findings are in line with the literature on policies and institutions to foster financial deepening. Specifically, monetary stability has been found to be a strong predictor of mortgage market development as have been specific dimensions of the contractual and information frameworks. Similarly, the negative relationship between government ownership and financial deepening identified by previous work also holds for mortgage market development, while there is no consistent relationship between competition and mortgage market development. However, we also find an important role for socio-economic factors, most importantly economic development as a driver for the development of mortgage markets.

Since our empirical findings are correlations rather than causal inferences, it is hard to draw policy conclusions. However, the empirical relationships that we identified allow us to make predictions about the development of mortgage markets in many low- and middle-income countries. Take the example of the strong empirical relationship between mortgage finance 24