Macroprudential policy, mortgage cycles and distributional effects: evidence from the United Kingdom
File(s)
Published version
Author(s)
Peydro, Jose-Luis
Rodriguez Tous, Francesc
Tripathy, Jagdish
Uluc, Arzu
Type
Journal Article
Abstract
We analyze the distributional effects of macroprudential policy on mortgage cycles by exploiting the U.K. mortgage register and a 2014 15% limit imposed on lenders’ high loan-to-income (LTI) mortgages. Constrained lenders issue fewer and more expensive high-LTI mortgages, with stronger effects on low-income borrowers. Unconstrained lenders strongly substitute high-LTI loans in local areas with higher constrained lender presence, but not high-LTI loans to low-income borrowers—consistent with adverse selection problems—implying lower overall credit to low-income borrowers. Consistently, policy-affected areas experience lower house price growth postregulation and, following the Brexit referendum (negative aggregate shock), better house price growth and lower mortgage defaults for low-income borrowers.
Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online
Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online
Date Issued
2024-03-01
Date Acceptance
2023-04-25
Citation
The Review of Financial Studies, 2024, 37 (3), pp.727-760
ISSN
0893-9454
Publisher
Oxford University Press
Start Page
727
End Page
760
Journal / Book Title
The Review of Financial Studies
Volume
37
Issue
3
Copyright Statement
© The Author(s) 2023. Published by Oxford University Press.
This is an Open Access article distributed under the terms of the Creative Commons Attribution License
(http://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction
in any medium, provided the original work is properly cited.
This is an Open Access article distributed under the terms of the Creative Commons Attribution License
(http://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction
in any medium, provided the original work is properly cited.
License URL
Publication Status
Published
Date Publish Online
2023-09-21