Economy, Business And Markets

Mortgage Securities’ Supply Outweigh Demand

Mortgage Securities’ Supply Outweigh DemandMortgage Securities’ Supply Outweigh Demand

Following the past three months’ declining prices of the mortgage-backed securities, the greater-than-demand supply is the main reason why such securities lost their value again in the past Iranian month of Azar, which ended December 21, reported SENA.

During the ninth month of the Iranian year, the supply accounted for 5.03 trillion rials while the demand hardly reached 3.8 trillion rials, according to the report.

The Iran Farabourse, the country’s over-the-counter (OTC) market, says in the current circumstances when there is a sharp slowdown in housing and construction sectors, the greatest threat to the mortgage-backed securities is that they are expired in two years time and that the buyers of such securities should pay attention to the expiry date.

Different branches of Maskan Bank across the country as well as the brokerage firms trade as much as 4 trillion rials worth of mortgage-backed-securities every month.

Officials at the OTC market recommend people to buy such securities only when they want to buy a property, urging them to refrain from speculatively trading the securities as a way to produce wealth.  

Mortgage-backed securities experienced unprecedented price hikes during the past few months and reached 1,000,000 rials for a 5-million-rial housing loan in May. But after they lost value, they are now standing at 780,000 rials.

The administration, which has been trying to harness the growing downtrend in housing securities market, will now have to deal with keeping the supply/demand balance.

Earlier in spring, mortgage securities became so expensive that officials had to impose restrictions on trade of such bonds in order to eliminate or curb speculative trading. During the period, despite the increase in prices of mortgage securities and the unprecedented stagnation in the construction and housing sector, a group of traders at Iran’s Farabourse traded such securities for profit.

Homebuyers, who have not deposited in Maskan Bank in order to benefit from future mortgages, can buy mortgage-backed securities at the OTC, which costs them some one fifth of the mortgage before the recent fall in the price of securities.

Meanwhile, the high housing prices have made it extremely difficult for people to rely on the housing loans, which averagely account for only 25% of a 12-year-old 50-square-meter apartment in central Tehran.