Take It to the Limit? The Effects of Household Leverage Caps

Sjoerd Van Bekkum, Marc Gabarró, Rustom Irani and Jose-Luis Peydro

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: We analyze the effects of borrower-based macroprudential policy at the household-level. For identification, we exploit administrative Dutch tax-return and property ownership data linked to the universe of housing transactions, and the introduction of a mortgage loan-to-value limit. The regulation reduces mortgage leverage, with bunching in its limit. Ex-ante more-affected households substantially reduce overall leverage and debt servicing costs but consume greater liquidity to satisfy the regulation. Improvements in household solvency result in less financial distress and, given negative idiosyncratic shocks, better liquidity management. However, fewer households transition from renting into ownership. All of these effects are stronger for liquidity-constrained households.

Keywords: macroprudential policy; residential mortgages; solvency vs. liquidity tradeoff; household leverage; loan-to-valud ratio (search for similar items in EconPapers)
JEL-codes: E21 E58 G21 G28 G51 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ban, nep-mac, nep-rmg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Take It to the limit? The effects of household leverage caps (2022)
Working Paper: Take it to the Limit? The Effects of Household Leverage Caps (2019)
Working Paper: Take It to the Limit? The Effects of Household Leverage Caps (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:216797

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