The impact of a macroprudential borrower-based measure on households’ leverage and housing choices

Daniel Abreu, Sónia Félix, Vitor Oliveira and Fátima Silva

Journal of Housing Economics, 2024, vol. 64, issue C

Abstract: This paper investigates the impact of changes in lending limits on household leverage and housing choices. Using credit registry data and a difference-in-differences estimation strategy we determine how a change in the loan-to-value (LTV) ratio - a macroprudential policy tool - affected constrained households. Our results show that the policy change was effective in reducing households' leverage as constrained households took out smaller loans and had lower loan-to-income ratios. Such households also paid higher interest rate spreads and had higher loan-service-to-income ratios than the control group. Finally, we also show that the policy change affected households' housing choices, as constrained households bought less expensive houses. Our results highlight the improvement of the risk profile of households following the introduction of the LTV limits.

Keywords: Macroprudential policy; LTV limit; Residential mortgages; Household leverage (search for similar items in EconPapers)
JEL-codes: D14 E58 E61 G21 G28 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:64:y:2024:i:c:s1051137724000147

DOI: 10.1016/j.jhe.2024.101995

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