Mortgage credit and house prices: evidence to inform macroprudential policy

Filippo Arigoni, Fergal McCann and Fang Yao
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Filippo Arigoni: Central Bank of Ireland
Fergal McCann: Central Bank of Ireland
Fang Yao: Central Bank of Ireland

No 11/FS/22, Financial Stability Notes from Central Bank of Ireland

Abstract: The link between mortgage credit and the housing market is central to the objectives of macroprudential policy. In this Note we describe the role that macroprudential policy plays in guarding against the emergence of an unsustainable relationship between credit and house prices, and introduce two models available to the Central Bank of Ireland to assess the likely effects of changes in the calibration of LTI or LTV limits on the aggregate house price to income ratio. Relative to a baseline projection, the recalibration of the mortgage measures for 2023 onward is estimated to increase the aggregate HPI by between 2.8 and 4 per cent over a three year horizon.

Date: 2022-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mon and nep-ure
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