DEFINITION of 'Restricted Market'

A market which does not allow for a free-floating exchange rate, such as a region whose exchange rate is heavily controlled by the government and only partly influenced by general economic variables.

An example of a restricted market would be a currency that is pegged to another country's currency. A blocked currency market is more controlled than a restricted market, and a free market is less controlled. Restricted markets are not limited to currency, but include most types of market activities that are closely monitored and regulated.

BREAKING DOWN 'Restricted Market'

In the aftermath of the housing crisis of the late 2000s, the Mortgage Guaranty Insurance Corporation declared various cities and some entire states to be restricted markets for mortgage insurance because they considered them too weak/risky. These areas included the states of Arizona, California, Florida and Nevada and the cities of Honolulu, Detroit, Baltimore and Minneapolis, among many others.

This restriction meant that the company would not insure loans for greater than 95% of the property's value, loans for investment properties or cash-out refinances. Potential buyers needed to have at least a 5% down payment to take out a mortgage with a lender who obtained its private mortgage insurance through the Mortgage Guaranty Insurance Corporation. Other mortgage-insurance companies enacted similar restrictions.

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