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Macroprudential Policy, Household Credit and House Prices

Author

Listed:
  • Francesco Caloia
  • Madi Mangan
  • Mauro Mastrogiacomo

Abstract

This paper investigates how changes in credit availability influence house prices. We show that increases in household credit triggered by a relaxation of lending standards lead to higher transaction prices, higher shares and amounts of overbidding transactions and lower property sale times in the housing market. The impact on prices increases throughout the housing boom due to a higher take-up of credit by households. Also, it is stronger in locations with tighter housing supply and lower affordability, among liquidity­ constrained but credit-unconstrained buyers, as well as for more expensive properties. The findings support the credit-driven household demand hypothesis and highlight that mac­ roprudential policy contains systemic risk not only by reducing household leverage, but also by curbing house price growth over the cycle.

Suggested Citation

  • Francesco Caloia & Madi Mangan & Mauro Mastrogiacomo, 2025. "Macroprudential Policy, Household Credit and House Prices," Working Papers 842, DNB.
    • Handle: RePEc:dnb:dnbwpp:842
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    Keywords

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    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

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