The effects of mortgage debt limits: lessons and questions from the Irish experience since 2015

Edward Gaffney, Niamh Hallissey and Fergal McCann

Chapter 8 in Research Handbook of Macroprudential Policy, 2026, pp 178-199 from Edward Elgar Publishing

Abstract: In this chapter, we draw lessons from research and analysis into mortgage debt limits in Ireland. Granular and comprehensive micro-data for the Irish mortgage market allow the use of a wide range of empirical identification strategies. We find that lenders maintained credit growth following the introduction of debt limits in 2015, while adjusting their loan portfolios as a response. Borrowers changed their behaviour, particularly those faced with liquidity and leverage constraints. Debt limits are found to most impactful among households with lower incomes, earlier in the life cycle, and in less affordable local housing markets; they affect both mortgage choice and housing market participation. Borrower resilience benefits can be discerned even during times of normal economic growth, but can only be fully measured during adverse conditions. We discuss the role of housing market conditions on calibration, emphasising that house prices should not be the target of this macroprudential policy; instead, policy should address specific, plausible financial amplification channels within house price determination. The benefits of macroprudential policy for non-banks are highlighted. Finally, we propose questions that remain open for future research.

Keywords: Mortgages; Macroprudential regulation; Leverage; Loan-to-value; Loan-to-income (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035306206
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