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Easing of borrower-based measures: Evidence from Czech loan-level data

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  • Hodula, Martin
  • Pfeifer, Lukáš
  • Ngo, Ngoc Anh

Abstract

We analyze the impact of easing borrower-based measures on residential mortgage credit and borrower characteristics in the Czech Republic in early 2020. This easing included a relaxation of the LTV limit and the abolition of the DTI and DSTI limits. Our findings indicate that affected households increased borrowing, purchased more expensive houses, and accepted lower collateral values. Borrowers' debt service burdens rose but were offset by income growth. We find that: (i) LTV-constrained borrowers exhibited cash-retention behavior, while DTI- and DSTI-constrained borrowers aligned with the financial accelerator motive; (ii) LTV relaxation had a greater effect in poorer counties, while the abolition of DTI and DSTI limits affected richer regions; (iii) younger borrowers were more impacted by LTV and DTI easing, whereas DSTI easing influenced older borrowers; and (iv) LTV relaxation primarily affected first-time borrowers, while the abolition of DTI and DSTI limits impacted repeat borrowers, who obtained larger mortgages and purchased more expensive properties.

Suggested Citation

  • Hodula, Martin & Pfeifer, Lukáš & Ngo, Ngoc Anh, 2025. "Easing of borrower-based measures: Evidence from Czech loan-level data," Journal of Banking & Finance, Elsevier, vol. 178(C).
    • Handle: RePEc:eee:jbfina:v:178:y:2025:i:c:s0378426625001098
    DOI: 10.1016/j.jbankfin.2025.107489
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