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That has a side effect of requiring 20% down (after all transaction fees), which means buyers have to save significantly longer than when 3% or 5% down payment loans can be made.

This has disadvantages for some people over a credit rating system, even if it’s overall cheaper for the people who can get loans under it.

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This also means that you the likelihood of ending up with insurmountable personal debt in case of a default on the mortgage is a lot smaller.

In some cases the down payment can be a bank loan at significantly higher rates. I did this for my house and the rate for the down payment loan was something like 8% while mortgage was 2%. I forget what percentage of the total was a bank loan but it was around 10-15%.

There are not the same conditions on the bank loan, though. E.g. a bank loan can in theory be called in with a months notice, while this is not the case for the bond based mortgage.

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