IDEAS home Printed from https://ideas.repec.org/p/cbi/wpaper/13-rt-25.html

Macroprudential easing and mortgage borrower outcomes: Evidence from Ireland

Author

Listed:
  • Singh, Anuj Pratap

    (Central Bank of Ireland)

  • Yao, Fang

    (Central Bank of Ireland)

Abstract

We examine key borrower level outcomes transmitted through Ireland’s 2023 recalibration of the loan-to-income (LTI) limit for first-time buyers (FTBs), which increased the cap from 3.5 to 4. Employing identifying assumptions and propensity score matching on granular mortgage data, we compare the exposed FTBs (the treatment group) and second/subsequent buyers (SSBs, the control group) using a difference-in-differences design. Our findings show that the LTI easing led to an increase in credit for borrowers who were likely most affected by the limit, but this additional credit was used differently in Greater Dublin Area versus the Rest of the Country. Moreover, the LTI allowances (lending above the LTI limit) played an important role in facilitating access for lower-income borrowers before the easing, and we provide evidence that in the new framework, these borrowers are being facilitated credit as a result of the higher LTI limit, in line with the intended policy outcome.

Suggested Citation

  • Singh, Anuj Pratap & Yao, Fang, 2025. "Macroprudential easing and mortgage borrower outcomes: Evidence from Ireland," Research Technical Papers 13/RT/25, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:13/rt/25
    as

    Download full text from publisher

    File URL: https://www.centralbank.ie/docs/default-source/publications/research-technical-papers/macroprudential-easing-and-mortgage-borrower-outcomes-evidence-from-ireland.pdf?sfvrsn=fa756e1a_8
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Martin Cesnak & Andrej Cupak & Pirmin Fessler & Jan Klacso, 2025. "Heterogenous Impacts of Macroprudential Policies: Financial Advisors, Regulatory Caps, and Mortgage Risk," Working and Discussion Papers WP 3/2025, Research Department, National Bank of Slovakia.
    2. Fergal McCann & Conor O'Toole, 2019. "Cross-Border Macroprudential Policy Spillovers and Bank Risk-Taking," International Journal of Central Banking, International Journal of Central Banking, vol. 15(4), pages 267-311, October.
    3. Nitzan Tzur-Ilan & Tarun Ramadorai, 2023. "Adjusting to Macroprudential Policies: Loan-to-Value Limits and Housing Choice," The Review of Financial Studies, Society for Financial Studies, vol. 36(10), pages 3999-4044.
    4. 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).
    5. Bandoni, Emil & Pratap Singh, Anuj, 2024. "Who uses the Help to Buy scheme? Stylised facts and trends," Financial Stability Notes 6/FS/24, Central Bank of Ireland.
    6. Viral V. Acharya & Katharina Bergant & Matteo Crosignani & Tim Eisert & Fergal Mccann, 2022. "The Anatomy of the Transmission of Macroprudential Policies," Journal of Finance, American Finance Association, vol. 77(5), pages 2533-2575, October.
    7. Laufer, Steven & Tzur-Ilan, Nitzan, 2021. "The effect of LTV-based risk weights on house prices: Evidence from an Israeli macroprudential policy," Journal of Urban Economics, Elsevier, vol. 124(C).
    8. François Ortalo-Magné & Sven Rady, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints ," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 459-485.
    9. Daniel L. Greenwald & Adam Guren, 2025. "Do Credit Conditions Move House Prices?," American Economic Review, American Economic Association, vol. 115(10), pages 3559-3596, October.
    10. Armstrong, Jed & Skilling, Hayden & Yao, Fang, 2019. "Loan-to-value ratio restrictions and house prices: Micro evidence from New Zealand," Journal of Housing Economics, Elsevier, vol. 44(C), pages 88-98.
    11. Higgins, Brian E., 2024. "Mortgage borrowing limits and house prices: evidence from a policy change in Ireland," Working Paper Series 2909, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gillitzer, Christian & Prasad, Nalini, 2025. "The effects of macroprudential policy restricting housing investor credit supply," Journal of Urban Economics, Elsevier, vol. 149(C).
    2. Gong, Yifan & Leung, Charles Ka Yui, 2024. "Does space matter? The case of the housing expenditure cap," Regional Science and Urban Economics, Elsevier, vol. 104(C).
    3. Antonia Díaz & Belén Jerez & Juan Pablo Rincón-Zapatero, 2024. "Housing Prices and Credit Constraints in Competitive Search," The Economic Journal, Royal Economic Society, vol. 134(657), pages 220-270.
    4. Dirma, Mantas & Karmelavičius, Jaunius, 2025. "Micro-assessment of macroprudential borrower-based measures," Journal of Banking & Finance, Elsevier, vol. 176(C).
    5. Yongbin Huang & Hai Hong, 2023. "The heterogeneous impact of house purchase limits policy on housing prices: Comparison between elite and non‐elite school district houses," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(5), pages 1055-1078, September.
    6. Higgins, Brian E., 2024. "Mortgage borrowing limits and house prices: evidence from a policy change in Ireland," Working Paper Series 2909, European Central Bank.
    7. Charles Ka Yui LEUNG, 2022. "Housing and Macroeconomics," ISER Discussion Paper 1197, Institute of Social and Economic Research, The University of Osaka.
    8. Kasper Kragh Balke & Markus Karlman & Karin Kinnerud, 2024. "Winners and Losers from Property Taxation," Working Papers 04/2024, Centre for Household Finance and Macroeconomic Research (HOFIMAR), BI Norwegian Business School.
    9. Martin Cesnak & Andrej Cupak & Pirmin Fessler & Jan Klacso, 2025. "Heterogenous Impacts of Macroprudential Policies: Financial Advisors, Regulatory Caps, and Mortgage Risk," Working and Discussion Papers WP 3/2025, Research Department, National Bank of Slovakia.
    10. Kristin J. Forbes, 2021. "The International Aspects of Macroprudential Policy," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 203-228, August.
    11. John Muellbauer, 2024. "Housing and Macroprudential Policy," Economics Series Working Papers 1056, University of Oxford, Department of Economics.
    12. Caloia, Francesco G., 2024. "Borrower-based measures, house prices and household debt," Journal of International Money and Finance, Elsevier, vol. 143(C).
    13. LinLin, Sun & Yawen, Zhang & Xiaojun, Xue, 2024. "The effects of macroprudential policies on house prices: Evidence from non-ordinary house purchasing policy using China real transaction data," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 2086-2101.
    14. Belinda Tracey & Neeltje Van Horen, 2021. "The consumption response to borrowing constraints in the mortgage market," Bank of England working papers 919, Bank of England.
    15. Koetter, Michael & Noth, Felix & Wöbbeking, Carl Fabian, 2025. "Contractionary macroprudential policy, collateral valuation, and risk-shifting in EU banking," IWH Discussion Papers 4/2025, Halle Institute for Economic Research (IWH), revised 2025.
    16. Katharina Bergant & Francesco Grigoli & Niels‐Jakob Hansen & Damiano Sandri, 2024. "Dampening Global Financial Shocks: Can Macroprudential Regulation Help (More than Capital Controls)?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(6), pages 1405-1438, September.
    17. Dong, Ding & Liu, Zheng & Wang, Pengfei & Zha, Tao, 2022. "A theory of housing demand shocks," Journal of Economic Theory, Elsevier, vol. 203(C).
    18. Bäckman, Claes, 2025. "Macroprudential policies and homeownership," SAFE Working Paper Series 459, Leibniz Institute for Financial Research SAFE.
    19. Tom Cusbert, 2023. "The Effect of Credit Constraints on Housing Prices: (Further) Evidence from a Survey Experiment," RBA Research Discussion Papers rdp2023-01, Reserve Bank of Australia.
    20. Philippe Bracke & Silvana Tenreyro, 2021. "History Dependence in the Housing Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(2), pages 420-443, April.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbi:wpaper:13/rt/25. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fiona Farrelly (email available below). General contact details of provider: https://edirc.repec.org/data/cbigvie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.