In the mortgage market, lenders supply which of the following?

• A. Down payments demanded by banks to reduce default risk
• B. Funds (loanable funds/credit) to borrowers in exchange for interest payments
• C. Mortgage-backed securities demanded by households for consumption smoothing
• D. Housing services demanded by renters and homebuyers

Answer: (B)

Verified step by step guidance

1. Understand the role of lenders in the mortgage market: lenders provide resources that borrowers need to purchase homes.
2. Recognize that lenders supply funds (loanable funds or credit) to borrowers, which borrowers repay with interest over time.
3. Identify that down payments are made by borrowers to lenders, not supplied by lenders themselves; thus, down payments are not supplied by lenders.
4. Note that mortgage-backed securities are financial products created from mortgages and are typically demanded by investors, not supplied by lenders directly in the mortgage market context.
5. Understand that housing services are consumed by renters and homebuyers, representing demand in the housing market, not supply by lenders.