Easing of Borrower-Based Measures: Evidence from Czech Loan-Level Data
Martin Hodula,
Lukas Pfeifer and
Ngoc Anh Ngo
Working Papers from Czech National Bank, Research and Statistics Department
Abstract:
We analyze how a large-scale easing of borrower-based measures affects residential mortgage credit and borrower characteristics. We exploit a case of the easing of the LTV limit and the complete abolition of DTI and DSTI limits in the Czech Republic in the first half of 2020. Our empirical evidence suggests that the households affected increased their borrowing and purchased more expensive houses while being able to decrease the collateral value. We also document a significant increase in borrowers' debt (service) but this was softened by the concurrent growth in borrowers' income. While exploring the heterogeneity in the transmission of the regulatory easing, we find that: (i) LTV-constrained borrowers showed signs of cash-retention behavior while DTI- and DSTI-constrained borrowers acted in line with the financial accelerator mechanism; (ii) relaxing the LTV limit had a larger effect in poorer districts while the abolition of DTI and DSTI limits affected borrowers in richer regions; (iii) younger borrowers were more affected by the easing of LTV and DTI limits, while the easing of the DSTI limit affected older borrowers; (iv) relaxing the LTV limit affected mostly first-time borrowers while abolishing the DTI and DSTI limits affected mostly second-time borrowers who obtained higher mortgages and purchased more expensive property.
Keywords: Borrower-based measures; household finance; loosening; macroprudential policy (search for similar items in EconPapers)
JEL-codes: E58 G21 G28 G51 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eur, nep-tra and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://www.cnb.cz/export/sites/cnb/en/economic-re ... wp/cnbwp_2023_18.pdf
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2023/18
Access Statistics for this paper
More papers in Working Papers from Czech National Bank, Research and Statistics Department Contact information at EDIRC.
Bibliographic data for series maintained by Tomas Karhanek ().