Mortgage borrowers at the loan-to-income limit

Edward Gaffney
Additional contact information
Edward Gaffney: Central Bank of Ireland

No 11/FS/19, Financial Stability Notes from Central Bank of Ireland

Abstract: I show that lenders respond to Ireland’s macroprudential mortgage measures by reducing lending and leverage to households seeking high loan-to-income ratios. Applying a bunching estimator to supervisory mortgage records in Ireland, it is shown that at least one in eight owner-occupier borrowers in 2018 took on less debt than they would have if there were no loan-to-income limit. The total reduction is at least one-half of one per cent of all new mortgage lending. Households at the limit earn less than other borrowers and are more likely to be single-income, two characteristics that have been associated historically with higher credit risk. These households reduce leverage by committing more gifts and non-earned deposits than other borrowers. The results suggest that due to the loan-to-income regulation, households with high credit-risk characteristics tend to borrow less, easing their burdens of leverage and debt service.

Date: 2019-11
New Economics Papers: this item is included in nep-ban and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://centralbank.ie/docs/default-source/publica ... public.pdf?sfvrsn=13 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbi:fsnote:11/fs/19

Access Statistics for this paper

More papers in Financial Stability Notes from Central Bank of Ireland Contact information at EDIRC.
Bibliographic data for series maintained by Fiona Farrelly ().