4/2023 Merike Kukk, Natalia Levenko, Nicolas Reigl. Measuring the Effects of Borrower-based Policies on New Housing Loans in Estonia
Working Papers of Eesti Pank 4/2023
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 service-to-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.
JEL Codes: G21, G51, E58, D39
Keywords: borrower-based policy measures, debt service-to-income ratio, housing loans, density distributions, extensive and intensive margin
The views expressed are those of the authors and do not necessarily represent the official views of Eesti Pank or the Eurosystem