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Real estate: are high loan-to-value ratios the most risky?
[Immobilier : les ratios prêt-valeur élevés sont-ils les plus risqués ?]

Author

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  • Thomas Ferrière
  • Laure Frey

Abstract

Household mortgage debt can jeopardise financial stability, as the 2008 crisis showed. This risk is often assessed using the ratio of the loan amount to the value of the financed property, or loan-to-value ratio (LTV). Yet, very high LTVs cover in large part the property purchases, excluding primary residences, of households with the highest incomes, which are not necessarily the most risky. Therefore, this ratio by itself is insufficient to provide the full picture. L’endettement immobilier des ménages est un enjeu de stabilité financière, comme l’a montré la crise de 2008. Le risque est souvent apprécié à partir du ratio de la dette rapportée à la valeur du bien financé. Or les ratios très élevés recouvrent en grande partie des acquisitions hors résidence principale de ménages à plus hauts revenus qui ne sont pas nécessairement les plus risqués. L’examen de ce seul ratio ne suffit donc pas pour établir un diagnostic complet.

Suggested Citation

  • Thomas Ferrière & Laure Frey, 2019. "Real estate: are high loan-to-value ratios the most risky? [Immobilier : les ratios prêt-valeur élevés sont-ils les plus risqués ?]," Eco Notepad (in progress) 102, Banque de France.
    • Handle: RePEc:bfr:econot:102
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