A Broader View of Housing-Market Macroprudential Measures

Abstract

Housing-market macroprudential measures are among the most commonly used by policymakers, but there remain a number of unresolved issues arising from their use. For example, there is some ambiguity concerning the objective of housing-market macroprudential policy, which may in turn lead to issues inter alia in terms of accountability; some issues arise from standard practice in macroprudential policy modelling, including consistent measurement of policies in cross-country datasets; and we contend that a wider range of effects of LTV/DSTI policy should be considered beyond their immediate effect on mortgage lending and house prices. Based on our own research, we suggest that there is some indication that banks may respond to housing market controls with greater balance sheet risk. This may require consideration of what additional regulatory policies are needed to ensure overall financial stability when housing-market macroprudential policies are applied.