TheEffectofCreditConstraintsonHousing
Choices:TheCaseofLTVLimit
NitzanTzur-Ilan
BankofIsrael,HebrewUniversity
ResearchDepartmentConference,December2016
1/25
Motivation
◮ThegeneralobjectiveofLoan-To-Value(LTV)limits,a
commonmacroprudentialpolicy(MPP)tool,istoreducethe
systemicriskinfinancialsystems.
◮TheLTVlimitwasdesignedbytheBOItoprotectthe
bankingsystem
andtheborrowersfromrisksassociatedwith
excessiveleveraging.
◮LTVlimitationsmayalsoinfluencethehousingchoicesof
affectedindividuals.
◮Thereisverylimitedexistingresearchonsucheffects.
◮Thispaperusesrichdatatoexamineatopicthatisimportant
topolicymakersandthatsupportspolicydesign.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
2/25
Literature
◮MainlyfocusesontheeffectofMPPsonbanks’stability.
◮LTVlimitsreducebanklossesindownturns(KrznarandMorsink2014,Limetal2011)
◮But,thetransmissionmechanismsofcreditconstraintsatthe
borrowerlevelarenotwellexplored.
◮Previousstudiesmainlyfocussedonthedelinquencyratio.(Eluletal,2010)
◮Mixedevidenceoftheeffectofcreditconstraintsonthe
housingmarket.
◮Mainlyonhomeprices:Cross-sectionalstudies-KuttnerandShim(2013),Country-Specific
"Case"Studies-IganandKang(2011),Hanetal.(2015)
EffectofLTVLimitonHousing
NitzanTzur-Ilan
3/25
Literature:MainChallenges
◮AmajorobstacleinthisliteratureisthattheMPPsareused
incombinationwithotherpoliciesandmacroeconomicevents,
leadingtoachallengeinattributingoutcomestospecific
MPPtools.
◮Mostrelyonmacrodata/cross-countryanalyses,andare
unabletoassessthedistributionaleffect.
◮(Claessensetal,2015,IMF,2011,Limetal,2011)—Problemofidentification,controllingfor
countrycharacteristics.
◮LittleevidenceregardingtheeffectofMPPsonconsumer
behaviorinthecreditandhousingmarkets.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
4/25
Background:TheHousingMarketinIsrael
TheRateofChangeofHomePricesinIsrael,01/2007-12/2015:
EffectofLTVLimitonHousing
NitzanTzur-Ilan
5/25
TheRegulatoryChange
◮InOctober2010,theBankofIsraelrequiredbankstoincrease
thecapitalprovisionformortgageswithLTVgreaterthan
60%.
◮Thisguidelinedidnotapplytohousingloansoriginally
amountingtolessthanNIS800,000.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
6/25
Data 1.Loan-leveldatafromtheBankofIsrael-mortgagecontracts
andborrowercharacteristics(90Kobs.fromJan2010toMay
2011).
2.HousingunitcharacteristicsfromtheIsraelTaxAuthority-
(Merged:27Kobs.)
⇓ Detailedinformationonthemortgage(interestrate,LTV,
etc.),ontheborrower(age,income)andonthehousing
unit(size,locationetc.)
EffectofLTVLimitonHousing
NitzanTzur-Ilan
7/25
Data-SampleStatistics
Data
set
Vari
able
Mean
S.D
.M
ean
S.D
.C
oef
S.E
.
Mort
gage
co
ntra
cts
LT
V (
%)
56.7
19.7
55.9
18.9
-0.8***
0.2
Ave
rage
inte
rest
rat
e (%
)2.4
10.6
72.7
10.9
70.3***
0.0
1
Hom
e P
urch
ase
Rea
l hom
e p
rice
s (N
IS t
hous
and)
1,0
26
572
968
537
-58***
6.8
Tra
nsa
ctions
Room
s3.9
81.0
93.9
71.1
0.0
0.0
Are
a (s
qua
re m
eter
s)97.3
48.7
96.9
79.3
-0.4
0.8
Dis
tanc
e fr
om
Tel
Avi
v (K
M)
45.2
45.7
47.8
45.8
2.6***
0.5
Nei
ghbo
rhoo
d R
ankin
g11.9
3.6
110.4
3.5
-1.5***
0.0
**
* p
<0
.01
, *
* p
<0
.05
, *
p<
0.1
Sourc
es:
Dat
a on m
ort
gage
s fr
om
the
Ban
k o
f Is
rael
, D
ata
on p
urc
has
e tr
ansa
ctio
ns
(Kar
men
Dat
abas
e) a
re f
rom
The
Isra
el T
ax A
uth
ori
ty.
Num
ber
of
obse
rvat
ions:
27,3
24
(16,1
00
bef
ore
the
LT
V lim
it, 11,2
24
aft
er t
he
LT
V lim
it).
Note
: R
eal
hom
e p
rice
s w
ere
def
late
d b
y t
he
month
ly c
han
ge i
n t
he
Index
of
Hom
e P
rice
s.
Sum
mar
y S
tatis
tics
Befo
re t
he L
TV
Lim
itA
fter
the L
TV
Lim
itD
iffe
ren
ce
EffectofLTVLimitonHousing
NitzanTzur-Ilan
8/25
IdentifyingAffectedBorrowers
◮LTVlimitrequiredbankstosetasidemorecapitalagainst
riskyloans.
◮Hence,theLTVlimitchangedthetermsoftheloancontract.
◮Ifocusontheeffectofthepolicyonthesubsetofborrowers
constrainedbythepolicy-AverageTreatmentEffectonthe
treated(ATT).
But:
◮Thetreatmentstatusisobservedonlybeforethepolicy.
◮TheborrowercouldhavetakenLTV>60%andpaidahigher
interestrate.
◮Also,theborrowercouldhavechosenLTV<60%andbought
adifferentasset.
◮2mainmethodsofidentification
EffectofLTVLimitonHousing
NitzanTzur-Ilan
9/25
#1EmpiricalApproach—Cross-PeriodMatching
SimilarHouseholdsBeforeandAftertheRegulatoryChange
◮Matchinghouseholdswithsimilarcharacteristicsbeforeand
aftertheLTVlimitandexaminingthedifferencesintheir
behaviorinthecreditandhousingmarkets.
◮ATT:E(Y1−Y0|T=1,X)
◮Abadie-Imbens(2002):Mahalanobisdistance,withreplacement,bias-correction
◮Matchingisdoneusingtotalincomeandaverageageper
household.
◮Outcomevariables:homeprices,size,numberofrooms,
distancefrom
TelAviv,andqualityofneighborhoods.
◮Weaknesses:timevarying,othermacroeconomiceventscan
haveaneffect(willbeaddressedlaterinthesecondmatching
approach).
EffectofLTVLimitonHousing
NitzanTzur-Ilan
10/25
LTVLimitwasEffective:MortgagesBecameMore
Expensive
◮TheLTVlimitrequiredbankstosetasidemorecapital
againstriskyloans.
◮Increasedtheaverageinterestratefortheriskyborrowers
(LTV>60%).
0.2.4.6.8Density
02
46
8A
vera
ge
In
tere
st R
ate
befo
re
afte
r
kern
el =
epa
nechn
ikov, b
an
dw
idth
= 0
.06
06
Dis
trib
utio
n o
f th
e A
ve
rag
e I
nte
rest
Ra
te f
or
Bo
rro
we
rs w
ith
LT
V>
60
%
Kolmogorov-Smirnovtest:statisticallysignificantdifferencebetweenthegroups
EffectofLTVLimitonHousing
NitzanTzur-Ilan
11/25
LTVLimitwasEffective—InterestRateAbovevs.Below
WentUp
◮Comparisonof2identicalborrowersaboveandbelowthe60%
limit.
◮Beforetheregulation-nodifferencebetweenthe2borrowers
(0.01-0.03percentagepoints)
◮Aftertheregulation,theinterestratepaidbytheborrower
withLTV>60%is0.21-0.36percentagepointshigherthan
thesimilarborrowerbelowtheLTVlimit
Avera
ge R
ate
Avera
ge R
ate
Spre
ad
Spre
ad
Avera
ge R
ate
Avera
ge R
ate
Spre
ad
Spre
ad
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
AT
T.3
58**
*.2
51**
*0.2
13*
0.2
58**
.312**
*.2
97**
*0.2
51**
*0.2
59**
*
(.078)
(.081)
(.110)
(.129)
(.065)
(.063)
(.086)
(.079)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No. of obs. used
349
349
349
349
1,9
37
1,9
37
1,9
37
1,9
37
No
te: H
ete
ros
ke
da
sticity-
co
ns
iste
nt s
tan
da
rd e
rro
rs a
re in
pa
ren
the
se
s. **
*, *
*, *
in
dic
ate
sig
nific
an
ce
at th
e 1
, 5
, a
nd
10
pe
rce
nt le
vels
, re
sp
ective
ly.
Sp
rea
d -
th
e in
tere
st ra
te o
ver
the
PR
IME
. A
TT
is
th
e A
ba
die
-Im
be
ns
bia
s c
orr
ecte
d a
vera
ge
tre
ate
d e
ffe
ct m
atc
hin
g e
stim
ato
r.
Tre
ate
d-
wh
o b
orr
ow
ab
ove
60
% L
TV
th
res
ho
ld. B
orr
ow
ers
we
re M
atc
he
d, a
fte
r th
e L
TV
lim
it, b
y in
co
me
, a
ge
, b
an
k a
nd
du
ratio
n o
f th
e lo
an
.
Bank
Dura
tion
61%
VS
59%
61-6
5%
VS
55-5
9%
Tota
l incom
e
Avera
ge a
ge
EffectofLTVLimitonHousing
NitzanTzur-Ilan
12/25
LTVLimitisEffective—LTVGoesDown
◮Incentivizeriskyborrowers(LTV>60%)toreduceleverage:
0.01.02.03Density
02
04
06
080
100
LT
V
Be
fore
th
e L
TV
lim
it
Aft
er
kern
el = e
pa
nechn
ikov, b
an
dw
idth
= 2
.906
1
LT
V D
istr
ibu
tio
n B
efo
re a
nd
Aft
er
the R
estr
ictio
n
◮Lesscreditforthepurchaseofahousingunit.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
13/25
TestforCreditRationing
DidtheLTVLimitChangetheDistributionofBorrowers?
◮Distributionofborrowers’characteristicsbeforeandafterthe
LTVlimit:
◮Nosignificantchangeinthedistributionoftheborrowers’
characteristics.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
14/25
Results-Cross-PeriodMatching
◮MatchingsimilarhouseholdsbeforeandaftertheLTVlimit
◮Examiningthedifferencesintheirchoicesinthehousing
market.
Dep.
Vari
able
:
Nom
inal
Hom
e P
rices
(NIS
)
Real H
om
e
Pri
ces
(NIS
)S
ize (
sq.m
.)R
oom
s
Dis
tance
from
Tel
Aviv
(K
M)
Neig
hborh
ood
Rankin
g
AT
T1,397
-83,401***
-1.52
-0.04***
3.8***
-1.8***
(8,9
47)
(8,1
93)
(1.1
)(0
.01)
(0.7
)(0
.4)
AT
T (
%)
0.1%
-8.1%
-1.6%
-1.0%
8.4%
-9.1%
Note
: H
eter
osk
edas
tici
ty-c
onsi
sten
t st
andar
d e
rrors
are
in p
aren
thes
es. ***, **, * indic
ate
sign
ific
ance
at
the
1, 5, an
d 1
0 p
erce
nt
level
s,
resp
ecti
vel
y. N
um
ber
of
ob
serv
atio
ns:
11,2
24. A
TT
is
the
Ab
adie
-Im
ben
s b
ias
corr
ecte
d a
ver
age
trea
ted e
ffec
t m
atch
ing
esti
mat
or.
Tre
ated
-
housh
old
s w
ho b
orr
ow
aft
er t
he
LT
V lim
it (
Oct
ober
2010).
EffectofLTVLimitonHousing
NitzanTzur-Ilan
15/25
Magnitude
◮55%ofIsrael’spopulationlivesinthecenter(radiusof40KM
fromTLV),Within6monthsthetreatmentgroupmoved4
KMfartherfromTLV.
◮Toasignificantlylowergradedneighborhood.
◮Soborrowersadjustedtheirhousingchoicesinresponsetothe
LTVlimitation.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
16/25
WhereDidTheyMoveto?
◮70%oftheborrowersmovedfartherfromthecenter.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
17/25
WhichKindofNeighborhoodDidTheyMoveTo?
◮Foreachsub-groupofdistancefromTelAviv-significant
decreaseinthesocioeconomicratingofneighborhoods.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
18/25
#2-AlternativeApproach-Difference-in-Differences
Matching(WithinPeriods)
◮DoborrowerschoosedifferentassetsbecauseoftheLTVlimit
orbecauseoftheincreaseinhomeprices?
◮AccordingtotheOctober2010LTVlimit,thebankswere
requiredtoincreasethecapitalprovisionforloanswithLTV
higherthan60%exceedingNIS800K.
◮Examinedtwogroups:
◮Untreatedgroup-borrowedbetweenNIS600Kand700K
◮Treatmentgroup-borrowedbetweenNIS900Kand1,000K
◮Then,matchingbetweenthesetwogroupsbyobservable
characteristics.
◮Whiletheimpactofmacrovariablesappliestobothgroups,
onlyonegroupisaffectedbytheLTVlimit.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
19/25
ChangeintheLTVDistribution
0.01.02.03.04Density
02
04
06
08
01
00
LT
V
Be
fore
Aft
er
kern
el =
epa
nechn
ikov, b
an
dw
idth
= 2
.82
02
Un
tre
ate
d (
60
0-7
00
K lo
an
)
0.01.02.03.04Density
02
04
06
08
01
00
LT
V
Be
fore
Aft
er
kern
el =
epa
nechn
ikov, b
an
dw
idth
= 2
.94
72
Tre
ate
d (
900
-1,0
00
K loa
n)
EffectofLTVLimitonHousing
NitzanTzur-Ilan
20/25
ResultsDifference-in-DifferencesMatching(Within
Periods)
ChangeinRealHomePrices(NIS)
-74,728***
1,3
82,2
96***
1,4
56,8
84***
Tre
ate
d(2
2,2
42)
(15,5
20)
(15,8
96)
Dif
fere
nce
Aft
er
Befo
re
-43,0
22*
203,1
18***
246,0
00***
Dif
fere
nce in M
ean
(23,7
14)
( 24,5
77)
( 22,5
92)
-31,706
1,1
79,1
78***
1,2
10,8
84***
Untr
eate
d(2
4,8
55)
(20,0
44)
(15,2
96)
-67,789*
DID
Mat
chin
g (
by
ob
serv
ab
le c
hara
cte
risti
cs)
(36
,13
5)
Note
: H
eter
osk
edas
tici
ty-c
onsi
sten
t st
andar
d e
rrors
are
in p
aren
thes
es. ***, **, * indic
ate
sign
ific
ance
at
the
1, 5, an
d 1
0
per
cent
level
s, r
esp
ecti
vel
y. t
reat
ed b
orr
ow
ers
are
def
ined
as
those
that
borr
ow
ed f
rom
900,0
00 t
o 1
,000,0
00 N
IS. T
he
untr
eate
d b
orr
ow
ers
are
those
that
borr
ow
ed 6
00,0
00 t
o 7
00,0
00 N
IS. T
her
e ar
e 1,4
98 t
reat
ed b
orr
ow
ers
and 3
,462
untr
eate
d b
orr
ow
ers.
Contr
ol
borr
ow
ers
are
a su
bse
t of
the
untr
eate
d b
orr
ow
ers
sele
cted
as
the
close
st m
atch
to t
he
trea
ted b
orr
ow
ers
bas
ed o
n a
set
of
borr
ow
er c
har
acte
rist
ics:
Age
and i
nco
me.
Ther
e ar
e 1,4
98 b
orr
ow
ers
in t
he
contr
ol
group
. A
TT
is
the
Ab
adie
-Im
ben
s b
ias
corr
ecte
d a
ver
age
trea
ted e
ffec
t m
atch
ing
esti
mat
or.
◮AdeclineofNIS68K(4.7%)inrealhomepricesafterthe
LTVlimitinthetreatmentgroup
EffectofLTVLimitonHousing
NitzanTzur-Ilan
21/25
ResultsDifference-in-DifferencesMatching(Within
Periods)
DistancefromTelAviv(KM)
Dif
fere
nce
Aft
er
Befo
re
31.5
***
28.3
***
Tre
ate
d(1
.9)
(1.5
4)
(1.1
5)
3.2**
40.5
***
41.2
***
Unt
reate
d(1
.2)
(1.4
1)
(1.6
3)
-0.7
-9***
-12.9
***
Dif
fere
nce in M
ean
(1.5
)(2
.1)
(1.6
)
3.9
***
DID
Matc
hin
g (
by
ob
serv
ab
le c
hara
cte
risti
cs)
(1.7
)
4.3***
No
te:
Het
ero
sked
asti
city
-co
nsi
sten
t st
anda
rd e
rro
rs a
re i
n p
aren
thes
es.
**
*,
**
, *
in
dica
te s
ign
ific
ance
at
the
1,
5,
and
10
per
cen
t le
vel
s, r
esp
ecti
vel
y.
Tre
ated
bo
rro
wer
s ar
e de
fin
ed a
s th
ose
wh
o b
orr
ow
ed f
rom
NIS
90
0,0
00
to
1,0
00
,00
0.
Th
e
untr
eate
d bo
rro
wer
s ar
e th
ose
wh
o b
orr
ow
ed N
IS 6
00
,00
0 t
o 7
00
,00
0.
Th
ere
are
1,4
98
tre
ated
bo
rro
wer
s an
d 3
,46
2
untr
eate
d bo
rro
wer
s. C
on
tro
l bo
rro
wer
s are
a s
ubse
t o
f th
e un
trea
ted
bo
rro
wer
s se
lect
ed a
s th
e cl
ose
st m
atch
to
th
e tr
eate
d
borr
ow
ers
base
d o
n a
set
of
borr
ow
er c
har
acte
rist
ics:
Age
an
d in
com
e. T
her
e ar
e 1
,49
8 b
orr
ow
ers
in t
he
con
tro
l gr
oup
. A
TT
is t
he
Abad
ie-I
mbe
ns
bia
s co
rrec
ted
aver
age
trea
ted
effe
ct m
atch
ing
esti
mat
or.
◮Thetreatmentgroupmoves4.3KM(15%)fartherfromthe
centeraftertheLTVlimit.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
22/25
ResultsDifference-in-DifferencesMatching(Within
Periods)
NeighborhoodRanking(scaleof1-20) (1
.5)
(1.5
1)
-1.9
**
0.2
2.1
**
Dif
fere
nce in M
ean
No
te:
Het
ero
sked
asti
city
-co
nsi
sten
t st
anda
rd e
rro
rs a
re i
n p
aren
thes
es.
**
*,
**
, *
in
dica
te s
ign
ific
ance
at
the
1,
5,
and
10
per
cen
t le
vel
s, r
esp
ecti
vel
y.
Tre
ated
bo
rro
wer
s ar
e de
fin
ed a
s th
ose
wh
o b
orr
ow
ed f
rom
NIS
90
0,0
00
to
1,0
00
,00
0.
Th
e
untr
eate
d bo
rro
wer
s ar
e th
ose
wh
o b
orr
ow
ed N
IS 6
00
,00
0 t
o 7
00
,00
0.
Th
ere
are
1,4
98
tre
ated
bo
rro
wer
s an
d 3
,46
2 u
ntr
eate
d
borr
ow
ers.
Co
ntr
ol
borr
ow
ers
are
a su
bset
of
the
untr
eate
d bo
rro
wer
s se
lect
ed a
s th
e cl
ose
st m
atch
to
th
e tr
eate
d bo
rro
wer
s bas
ed
on
a s
et o
f bo
rro
wer
ch
arac
teri
stic
s: A
ge a
nd
inco
me.
Th
ere
are
1,4
98
bo
rro
wer
s in
th
e co
ntr
ol
gro
up.
AT
T i
s th
e A
badi
e-
Imbe
ns
bia
s co
rrec
ted
aver
age
trea
ted
effe
ct m
atch
ing
esti
mat
or.
(0.8
)(0
.8)
(0.9
)
-2.2***
DID
Matc
hin
g (
by
ob
serv
ab
le c
hara
cte
risti
cs)
(0.8
)
Dif
fere
nce
Aft
er
Befo
re
-2.4***
10.3
***
12.7
***
Tre
ate
d(0
.7)
(1.8
)(1
.1)
-0.5
10.1
***
10.6
***
Unt
reate
d(0
.5)
◮Thetreatmentgroupmovestolowerrankedneighborhoods
EffectofLTVLimitonHousing
NitzanTzur-Ilan
23/25
Isthereasub-groupthatismoreaffectedbytheLTVlimit?
Matching-bytypeofbuyer
No
min
al
Ho
me
Pri
ce
s (N
IS)
Re
al H
om
e
Pri
ce
s (N
IS)
Siz
e (s
q.m
.)R
oo
ms
Dis
tan
ce
fro
m T
el
Aviv
(k
m)
Qu
ality
of
Ne
igh
bo
rho
od
s
Co
ntr
ol
13,3
37
-60,1
79**
*-2
.28*
-0.0
4*
1.8
5**
*-0
.6**
Tre
ate
d[1
0,9
28]
[9,9
84]
[1.2
3]
[0.0
2]
[1.1
][0
.3]
Ch
an
ge
(%
)1
%-8
%**
*-3
%*
-1%
*4
%**
*-6
%**
Co
ntr
ol
5,3
44
-93,0
21**
*-1
.43*
-0.0
23.9
***
-1.1
***
Tre
ate
d[1
3,3
11]
[12,1
65]
[1.1
][0
.02]
[1.1
][0
.3]
Ch
an
ge
(%
)0
%-8
%**
*-1
%*
0%
9%
***
-11
%**
*C
on
tro
l-4
9,6
56**
-122,6
80**
*-0
.13**
*-0
.08*
5.5
7**
*-1
.5**
*T
reate
d[2
5,0
14]
[22,9
40]
[0.0
4]
[0.0
4]
[1.9
][0
.41]
Ch
an
ge
(%
)-5
%**
-12
%**
*0
%**
*-2
%*
9%
***
-15
%**
*
No
te: H
ete
ros
ke
da
sticity-
co
ns
iste
nt s
tan
da
rd e
rro
rs a
re in
pa
ren
the
se
s. **
*, *
*, *
in
dic
ate
sig
nific
an
ce
at th
e 1
, 5
, a
nd
10
pe
rce
nt le
vels
, re
sp
ective
ly. T
rea
ted
bo
rro
we
rs a
re d
efin
ed
as
th
os
e th
at b
orr
ow
ed
afte
r th
e L
TV
lim
it (
Octo
be
r 2
01
0).
Th
e u
ntr
ea
ted
bo
rro
we
rs a
re th
os
e w
ho
bo
rro
we
d b
efo
re th
e L
TV
lim
it. C
on
tro
l
bo
rro
we
rs a
re a
su
bs
et o
f th
e u
ntr
ea
ted
bo
rro
we
rs s
ele
cte
d a
s th
e c
los
es
t m
atc
h to
th
e tre
ate
d g
rou
p o
f b
orr
ow
ers
ba
se
d o
n a
se
t o
f b
orr
ow
er
ch
ara
cte
ris
tics
: A
ge
an
d in
co
me
. A
TT
is
th
e A
ba
die
-Im
be
ns
bia
s c
orr
ecte
d a
vera
ge
tre
ate
d e
ffe
ct m
atc
hin
g e
stim
ato
r. N
um
be
r o
f o
bs
erv
atio
ns
: F
irs
t-tim
e h
om
e b
uye
r, c
on
tro
l 3
,08
1
Avera
ge
Inv
es
tors
Up
gra
ders
Fir
st-
tim
e
ho
me b
uy
ers
◮InvestorswereaffectedmorebytheLTVlimit-moreflexible.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
24/25
Conclusions
◮ProvidesacredibleestimationoftheimpactofthefirstMPP
implementedinIsrael.
◮Keyfinding:
1.LTVlimitaffectsthemortgagecontractterms(interestrate,
loanamount).
2.Borrowersadjustedtheirhousingchoicesinresponsetothe
LTVlimitation:boughtcheaperhomes,fartherfromthe
center,inlowergradedneighborhoods.
3.InvestorsareinfluencedmorebytheLTVlimit.
◮Policyimplication:Understandinghowthemarket
participantsrespondtotheMPPiscrucialfordevelopingan
appropriatepolicyresponseframework.
EffectofLTVLimitonHousing
NitzanTzur-Ilan
25/25