Macro-prudential measures and the housing market

Gerard Kennedy and Rebecca Stuart
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Gerard Kennedy: Central Bank of Ireland

No 04/EL/15, Economic Letters from Central Bank of Ireland

Abstract: The Central Bank recently published a Consultation document on macro-prudential policy for residential mortgage lending including limits on loan-to-value and loan-to-income ratios. The consultation process highlighted a number of potential implications of these measures for the housing market, particularly for the rental market and for housing supply. This Letter first discusses some of the underlying economics of the housing market in a simple analytical framework. It then considers the potential implications of the proposed macro-prudential measures on the rental market and on housing supply in more detail, including possible policy options to counteract negative aspects.

Date: 2015-01
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