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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economic Working Paper Series ; No. 1682

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Central Banks and Their Policies ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: macroprudential policy ; residential mortgages ; solvency vs. liquidity tradeoff ; household leverage ; loan-to-valud ratio

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Van Bekkum, Sjoerd ; Gabarró, Marc ; Irani, Rustom ; Peydró, José-Luis
• Event: Veröffentlichung
• (who): Universitat Pompeu Fabra (upf), Department of Economics and Business
• (where): Barcelona
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/216797
• Last update: 10.03.2025, 11:43 AM CET