Stabilising Sentiment: Macroprudential Policy and House Price Expectations in Ireland

Fergal McCann and Luca Riva
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Fergal McCann: Central Bank of Ireland
Luca Riva: Central Bank of Ireland

No 12/SI/25, Central Bank Staff Insights from Central Bank of Ireland

Abstract: After borrower-based measures (BBM) were introduced in Ireland in 2015, average house price growth expectations fell upon impact and remained stable over the following four to five years, even as price growth accelerated The right tail of extreme growth expectations also dropped immediately upon policy introduction and stabilised until 2019, consistent with credit limits playing a role in stabilising more extreme or optimistic expectations that can be particularly important in credit bubble formation. Our findings suggest macroprudential policies act as a "guardrail" that shifts forward-looking beliefs and contributes to macro-financial stability beyond the direct effects of these policies on the volume and riskiness of lending.

Date: 2025-12
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