Pushing the Limit: How Borrowers Tackle an LTV Cap

Lara Coulier, Selien De Schryder, Milan van den Heuvel and Tobias Verlaeckt
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Tobias Verlaeckt: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We study how mortgage borrowers adjust their mortgage terms and household balance sheets in response to a loan-to-value (LTV) limit. Focusing on the 2020 Belgian LTV policy, we use granular loan- and account-level data from the country’s largest bank. A substantial share of borrowers reduced their LTV ratios, with adjustment patterns varying by income, liquid wealth, and household type. Borrowers mainly responded by increasing downpayments and reducing loan amounts, though these responses were weaker among lower-income households. While the adjustments led to safer mortgages, they were also associated with declines in liquid wealth and consumption in the year following purchase.

Keywords: Housing; Macroprudential Policy; Mortgage Market; Household Finance; Borrower; Heterogeneity (search for similar items in EconPapers)
JEL-codes: E58 G21 G51 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2026-02
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:26/1138

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