Actually a good question, and in practice: no it doesn't, not significantly. Aside from 2008-style systemic failures across the board, the risk is non-correlated across borrowers, and hedged through the collateral of the property itself anyway, whose deed remains with the lender until the mortgage is paid off. In practice, due diligence regarding the borrower's present finances seems plenty. This seems especially true where there's a decent social safety net that reduces the occurrences of individual bankruptcies.
And anecdotally, despite the aforementioned letter, we got top market rates on our mortgage.
Worth noting that 2008 occurred in part because mortgages were seen as entirely risk-free in aggregate, even as credit reports were already a thing in the US at the time.
As far as I can tell, credit reports are more a tool that lets lenders wring more money out of borrowers in confidence that their competitors will not undercut them, since the borrowers carry their credit reports with them.
And anecdotally, despite the aforementioned letter, we got top market rates on our mortgage.
Worth noting that 2008 occurred in part because mortgages were seen as entirely risk-free in aggregate, even as credit reports were already a thing in the US at the time.
As far as I can tell, credit reports are more a tool that lets lenders wring more money out of borrowers in confidence that their competitors will not undercut them, since the borrowers carry their credit reports with them.