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Residential real estate (RRE) lending standards: determinants and financial stability implications

Author

Listed:
  • De Nora, Giorgia
  • Durante, Elena
  • Fontana, Adele
  • Forletta, Marco
  • Ghetti, Gregorio
  • Jarmulska, Barbara
  • Perales, Cristian
  • Scalone, Valerio

Abstract

This article looks into residential real estate (RRE) lending standards, focusing on their key determinants and assessing the implications of loose lending standards for financial stability and the real economy. Two key insights emerge. First, lending standards tend to be procyclical – i.e., they become looser during economic upturns and tighter during downturns. Second, loose lending standards amplify the effects of negative housing market shocks on the real economy and heighten financial stability risks via an increase in the probability of default of households. JEL Classification: E44, G01, G21, R31

Suggested Citation

  • De Nora, Giorgia & Durante, Elena & Fontana, Adele & Forletta, Marco & Ghetti, Gregorio & Jarmulska, Barbara & Perales, Cristian & Scalone, Valerio, 2025. "Residential real estate (RRE) lending standards: determinants and financial stability implications," Macroprudential Bulletin, European Central Bank, vol. 29.
    • Handle: RePEc:ecb:ecbmbu:2025:0029:1
    Note: 2648466
    as

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    More about this item

    Keywords

    Residential real estate lending standards; financial stability; real economy; procyclicality;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • 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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