 Micro-assessment of macroprudential borrower-based measuresMantas Dirma and Jaunius Karmelavičius Journal of Banking & Finance, 2025, vol. 176, issue C Abstract: This paper presents an assessment of macroprudential borrower-based measures (BBMs). Despite such measures being in place, several countries saw renewed increases in house prices and indebtedness when rates were low after the Global Financial Crisis. Against this background, we develop a novel modeling framework that allows to explore the link between multiple BBM limits and lifetime credit risk parameters. While our analysis is based on Lithuania’s household loan data, we draw three general lessons that have broader implications. First, we find that BBMs significantly reduce individual mortgage credit risk, thereby providing aggregate resilience. Second, our model indicates that the stance of an income-based measure, specifically the DSTI limit, may have been loose during the low-rate era, highlighting a potential weakness of the tool. Third, we provide empirical evidence supporting more stringent regulation of investor loans and propose a calibration approach. Keywords: Macroprudential policy; Borrower-based measures; LTV; Mortgage credit risk; Lifetime expected loss; Probability of default (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:176:y:2025:i:c:s0378426625000755 DOI: 10.1016/j.jbankfin.2025.107455 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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