Borrower-based measures, house prices and household debt

Francesco G. Caloia

Journal of International Money and Finance, 2024, vol. 143, issue C

Abstract: This paper quantifies the credit-driven housing demand and the role of macro-prudential Loan-to-Income (LTI) and Loan-to-Value (LTV) limits. Using granular and time-varying changes in borrowing capacity, I estimate how shocks in credit availability feed into credit demand and affect household debt. The findings indicate a robust relationship between debt and borrowing capacity that amplifies throughout a housing boom. The relationship is heterogeneous, as changes in borrowing capacity have larger effects among low-income and first-time buyers and in expensive property markets. If no downpayment is required, tightening the LTV limit may not contain borrowing capacity but still curbs leverage among highly-indebted borrowers.

Keywords: Borrower-based measures; Macro-prudential policy; LTV; LTI (search for similar items in EconPapers)
JEL-codes: G21 G28 G51 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:143:y:2024:i:c:s026156062400038x

DOI: 10.1016/j.jimonfin.2024.103051

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