##secured or secured – will be sensitive to a range of factors, including assessments of the idiosyncratic risks of a particular borrower, and the risks common across borrowers. variations in these factors give rise to the possibility of a credit cycle. a borrower ’ s ability to pledge collateral can help to overcome the problems of “ asymmetric information ” and enforceability, by evidencing its net worth and giving it a continuing stake in its contract with the lender. this can give rise to the so - called “ financial accelerator ” channel of the monetary transmission mechanism ( mtm ), in which monetary policy works partly by affecting lending terms through its effect on asset values and so the net worth of borrowers. 3 but credit conditions also depend on the access to credit of the lenders themselves. there is an important distinction here between intermediation across bank balance sheets and via the capital markets, although as i shall describe it turns out to be blurred. total credit : capital markets and securitisation for the moment, i shall put that distinction to one side in order to focus on total credit. a series of environmental changes over the past decade or so have affected the quantity and price of credit generally. greater macroeconomic stability, and perceptions that it will persist more or less uninterrupted, probably increased the supply of credit ; and by reducing risk premia, may have increased demand too ( diagram a ). other developments are more likely to have worked purely through credit supply. the most obvious is the growth of instruments such as credit derivatives and securitisation, associated with an increased role for rating agencies in monitoring credit risk. this was in effect a shock to technology, making portfolios transferable. by offering the prospect of better meeting desired risk profiles and by separating origination from investment, it has brought more nonbank financial institutions, and so more capital resources, into the credit markets, increasing the supply of credit ( diagram b ). this seems to have been borne out in the significant shift in actual credit quantities and prices up to the middle of this year. in the united kingdom, non - bank lenders have accounted for a greater share of credit extension to both the household and corporate sectors ( charts 2 - 4 ). stiglitz, j. e. and a. weiss ( 1981 ), “ credit rationing in markets with imperfect information ”, the american economic review, vol. 71, no. 3, pp 393

- term solution for many borrowers. fortunately, the housing market as a whole is a bright spot for the economy. higher home prices are improving the balance sheets of many households, even those that may face income and employment challenges, and new construction activity is generating new job opportunities. while affordability remains an important consideration, it is encouraging that housing has performed well in response to low interest rates. mortgage regulations and access to mortgage credit however, even during this period of strong performance in the housing market, access to affordable mortgage credit remains a barrier to homeownership for some borrowers, due in part to regulatory burden. since the last financial crisis more than a decade ago, there have been a number of new mortgage regulations that added requirements for both borrowers and lenders. 1 / 2 bis central bankers'speeches while many of these requirements have contributed to a safer and more consumer - friendly mortgage market, they have also introduced significant paperwork and delays that can present roadblocks for many borrowers. these new rules have also made it more difficult and costly for small banks to originate mortgage loans, leading many community banks to scale back on home lending activity or abandon it altogether. homeownership is as important to communities as it is to individuals, and access to credit for rural and low - to - moderate income communities often depends on community banks. in many communities, especially rural communities, if the local bank has been forced out of mortgage lending due to burdensome regulation, it means little or no access to mortgage credit, preventing buyers from financing home purchases and homeowners from selling their homes. many leaders of small community banks have told me that the compliance costs for originating smaller mortgages are prohibitive, and that the staffing and training required to meet the strict requirements are extraordinary in relation to the limited number of mortgages they originate. as one state banking commissioner said to me recently, “ it doesn ’ t make a lot of sense that you can make an $ 80, 000 truck loan on two sides of a sheet of paper, but that many, many pages of paperwork are required to make a $ 40, 000 loan on a mobile home or trailer. " in fact, i have been told by community bankers that they are sometimes compelled to make loans for lower - priced home purchases that are backed by other collateral, such as a car or equipment, because of the excessive burden of complying with the many residential home mortgage regulations and time frames for such small transactions. as a result