Regulating access to housing credit: the role of macroprudential policy in shaping affordability and housing dynamics

Abstract

This dissertation examines the effects of borrower-based macroprudential policies, specifically the LTV and DSTI ratio, on housing market dynamics and affordability across Eurozone countries. Using panel fixed effect regressions from 2005 to 2020, the study evaluates how these tools influence house prices, rent prices, and the housing cost overburden rate. Results suggest that LTV tightening reduces housing prices and improves affordability, while DSTI effects are more moderate and statistically insignificant in most specifications. The aggregate macroprudential indexes show limited impact on rent prices but a consistent, influence in improving affordability. Robustness tests include a one-year lag on the macroprudential measures and the exclusion of the 2008-2011 financial crisis period, my analysis confirms that MaPP impacts the dependent variables with a delay effects, while also acknowledging that the Baseline results were influenced by the housing price drop, felt during the subprime crisis. Overall, the finding suggests that targeted macroprudential policy can effectively reduce house prices while improving affordability.