Macroprudential Policy, Household Credit and House Prices

Francesco Caloia, Madi Mangan and Mauro Mastrogiacomo

Working Papers from DNB

Abstract: This paper investigates how changes in credit availability influence house prices. We show that increases in household credit triggered by a relaxation of lending standards lead to higher transaction prices, higher shares and amounts of overbidding transactions and lower property sale times in the housing market. The impact on prices increases throughout the housing boom due to a higher take-up of credit by households. Also, it is stronger in locations with tighter housing supply and lower affordability, among liquidity­ constrained but credit-unconstrained buyers, as well as for more expensive properties. The findings support the credit-driven household demand hypothesis and highlight that mac­ roprudential policy contains systemic risk not only by reducing household leverage, but also by curbing house price growth over the cycle.

Keywords: House prices; Household debt; Macroprudential policy; credit (search for similar items in EconPapers)
JEL-codes: G21 G28 G51 (search for similar items in EconPapers)
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:842

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