A literature review on ex-ante and ex-post analysis of the implications of borrower-based macroprudential measures

Adrián Carro, Jorge E. Galán, Enric Martorell and Raquel Vegas
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Adrián Carro: BANCO DE ESPAÑA
Jorge E. Galán: BANCO DE ESPAÑA
Enric Martorell: BANCO DE ESPAÑA
Raquel Vegas: BANCO DE ESPAÑA

No 2524, Occasional Papers from Banco de España

Abstract: This paper presents a comprehensive literature review on the effects of borrower-based macroprudential measures (BBMs)—such as loan-to-value (LTV), debt-to-income (DTI) and debt-service-to-income (DSTI) limits—with a particular focus on their effectiveness in mitigating systemic risks in housing markets. The review synthesizes findings from both empirical and theoretical studies. The evidence shows that BBMs are effective tools for addressing systemic risks arising from household over-indebtedness and real estate market imbalances. Empirical studies indicate that stricter mortgage lending standards significantly reduce the probability of default, moderate credit growth during expansionary phases and enhance the resilience of the financial system. Theoretical models further suggest that BBMs help stabilize credit cycles, lower the likelihood of financial crises and mitigate adverse welfare effects during downturns. However, they also highlight potential redistributive consequences. Overall, the evidence supports the inclusion of BBMs as core instruments within the macroprudential policy framework, while underscoring the need for flexible design and ongoing evaluation based on granular data and advanced modeling to ensure their effectiveness and minimize unintended effects.

Keywords: borrower-based measures; credit growth; defaults; house prices; macroprudential policy; models and mortgages (search for similar items in EconPapers)
JEL-codes: C83 E44 E58 G21 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2025-11
New Economics Papers: this item is included in nep-inv and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:2524e

DOI: 10.53479/41425

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