Mortgage loans against residential property are both readily available and cheap. With the possible exception of the sub-prime market, I expect this to continue. There are several reasons for this - most of which are risk related:
1. mortgage loans are secured over a tangible asset. Even if the asset declines in value, there is usually enough equity to protect the lender's position (or at least most of it);
2. historically, individual borrowers have shown low default rates on home loans and, where there is a default, the loss to the lender is very low compared to other types of defaulting loans;
3. transaction costs are low. Residential loan and mortgage documents are much more standardised and less negotiated than almost any other types of loan. Transaction size (compared to credit cards and other personal loans) also provides for some economies of scale for lenders;
4. mortgage loans can be securitised which removes them from the balance sheet (freeing up capital) and, depending on the terms of the securitisation, may also remove the default risk from the lender;
5. under Basel I, residential mortgage loans receive a very favourable risk weighting (50%) which means that banks have to provide relatively less capital against residential mortgage loans than against, for example, commercial loans. Under Basel II the risk weighting for residential mortgage loans will be reduced (to 35%) reducing the amount of capital required to support residential mortgage loans and making them even more attractive to banks.
In summary, there are good reasons why residential mortgage loans are both readily available and cheap. With banks already beginning to move to Basel II there is reason to believe that this situation will continue for lending which involves sensible financials (at least some deposit and reasonable debt servicing ability). In Hong Kong the excess liquidity means that many banks have surplus capital. This has resulted in intense competition between banks both for market share and volume in absolute terms. The cost of borrowing and the terms have become progressively more favourable to borrowers like me over the last few years.
The above comments are directed at conforming or typical loans made to a borrower who is able to document the ability to service the loan and who is able to put down a meaningful deposit. The emerging problems with America's sub-prime lending market make me more hesitant to express a view on the sub-prime or non-conforming section of the mortgage market.