A Measure of Bindingness in the Irish Mortgage Market

Macro-prudential policies such as the 2015 Irish mortgage measures have become increasingly utilised by central banks. These measures have implications for both lenders and borrowers given the prominence of mortgage debt on bank and household balance sheets. They transmit through the direct lending channel, whereby the level of bindingness alters the size and number of loans relative to a counterfactual with no measures. This Note provides a measure of bindingness by combining estimates of credit available and take-up for individual Irish borrowers. The proportion of borrowers drawing down more than 90 per cent of credit available to them rose from 29 to 46 per cent since the introduction of the measures. This suggests that the measures have become increasingly binding over time, consistent with the observed imbalance between demand and supply in the housing market, driving house prices to grow faster than incomes. In terms of distributional effects, the measures appear to be most binding for first time buyers in Dublin, given the high level of Dublin house prices relative to incomes compared to other parts of the country.