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Upgrading housing: the potential and limits of borrower-based measures

Author

Listed:
  • Pierre Monnin

    (aCouncil on Economic Policies and Centre for Economic Transition Expertise (London School of Economic and Political Science))

  • Adam Banai

    (Magyar Nemzeti Bank)

  • Kristina Bojare

    (Latvijas Banka)

  • Jan Klacso

    (Narodna banka Slovenska)

  • Reiner Martin

    (Narodna banka Slovenska)

  • Janos Szakacs

    (Magyar Nemzeti Bank)

Abstract

In this paper, we explore how borrower-based measures (BBMs) can be adjusted to provide additional funding for housing-related energy-efficiency investments without compromising financial stability objectives. We first show that lower energy costs and higher house price values resulting from renovation work allows an easing of borrowing limits while keeping loan risk metrics unchanged. We then focus on three recent easing measures implemented in Slovakia, Hungary, and Latvia and assess their effectiveness using a bank survey. We find that these policy changes did not significantly affect banks' credit portfolio risk profile and thus financial stability. At the same time, they did not generate a significant increase in loans for energy-efficient investments. We thus suggest combining BBM adjustments with other policy measures to improve energy-efficiency in real estate.

Suggested Citation

  • Pierre Monnin & Adam Banai & Kristina Bojare & Jan Klacso & Reiner Martin & Janos Szakacs, 2026. "Upgrading housing: the potential and limits of borrower-based measures," Working Papers 2026/03, Latvijas Banka.
    • Handle: RePEc:ltv:wpaper:202603
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    File URL: https://datnes.latvijasbanka.lv/papers/WP_3_2026.pdf
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    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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