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Measuring the effects of borrower-based policies on new housing loans in Estonia

Author

Listed:
  • Merike Kukk
  • Natalia Levenko
  • Nicolas Reigl

Abstract

The paper evaluates the outcomes of the borrower-based macroprudential policy measures that were introduced in Estonia in 2015. The core of the analysis is the response of the credit market in 2016–2021 to the upper limit on the debt serviceto-income ratio for new housing loans. The paper employs a novel approach based on the distribution of loan-level data, which allows the analysis to be made using only data from the post-treatment period. The average number of loans affected, meaning those that were rejected or taken in a smaller amount, is estimated to be on average around eleven per cent of the total number of new loans. The total stock of housing loans is on average around 1.7 per cent smaller. The losses in the volume of new loans due to the limit are fairly stable over the years despite the volume of housing loans growing in recent years.

Suggested Citation

  • Merike Kukk & Natalia Levenko & Nicolas Reigl, 2023. "Measuring the effects of borrower-based policies on new housing loans in Estonia," Bank of Estonia Working Papers wp2023-4, Bank of Estonia, revised 20 Jun 2023.
    • Handle: RePEc:eea:boewps:wp2023-4
    DOI: 10.23656/25045520/052022/0203
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    More about this item

    Keywords

    borrower-based policy measures; debt service-to-income ratio; housing loans; density distributions; extensive and intensive margin;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D39 - Microeconomics - - Distribution - - - Other

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