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Credit access, macroprudential rules and policy interventions: Lessons for potential first time buyers

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  • McQuinn, Kieran
  • O’Toole, Conor
  • Slaymaker, Rachel

Abstract

Given the increased popularity of macroprudential measures in the aftermath of the great financial crisis (GFC), a key policy question to arise in certain mortgage markets is whether a significant access to credit issue exists amongst prospective homeowners because of these new policies. In this paper we assess whether such a problem arises in the context of the Irish mortgage market – a market particularly adversely impacted by the GFC. We use a microsimulation model to estimate the level of latent credit demand that could be serviced by the market given prudent credit risk assessment and the current macroprudential regulations. We then compare this demand to current market provision to explore whether a credit gap exists. Finally, we simulate how a public mortgage credit scheme or equity “help-to-buy” type instrument may help credit access. We find both instruments to be effective but would lead to somewhat higher house prices.

Suggested Citation

  • McQuinn, Kieran & O’Toole, Conor & Slaymaker, Rachel, 2021. "Credit access, macroprudential rules and policy interventions: Lessons for potential first time buyers," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 944-963.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:5:p:944-963
    DOI: 10.1016/j.jpolmod.2021.03.013
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    Cited by:

    1. Egan, Paul & Kenny, Eoin & McQuinn, Kieran, 2022. "Increasing future housing supply: What are the implications for the Irish economy," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    2. Slaymaker, Rachel & Roantree, Barra & Nolan, Anne & O'Toole, Conor, 2022. "Future trends in housing tenure and the adequacy of retirement income," Research Series, Economic and Social Research Institute (ESRI), number RS143, June.
    3. Disch, Wendy & Slaymaker, Rachel, 2023. "Housing affordability: Ireland in a cross-country context," Research Series, Economic and Social Research Institute (ESRI), number RS164, June.
    4. Slaymaker, Rachel & Shiel, Eva, 2023. "New vs existing rental tenancies in Ireland: a first look at annual registrations microdata," Research Series, Economic and Social Research Institute (ESRI), number SUSTAT122, June.

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    More about this item

    Keywords

    Access to credit; Macroprudential; Mortgages;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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