Caps on Loan-to-Value ratio: Can they reduce housing bubble and credit growth?
|Author:||Mgr. Dominika Šubáková|
|Year:||2015 - summer|
|Leaders:|| Martina Jašová
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||An increasing trend of using macroprudential instrument, caps on loan-to-value (LTV) ratio, requires
a full understanding of how the instrument works in practice. As the empirical research is still scant,
this thesis attempts to contribute with a new evidence on LTV effectiveness in context of six
developed economies, namely Netherlands, Sweden, Ireland, Hungary, Latvia and Lithuania. To
achieve this objective we analyse the impact of caps on LTV on credit growth, mortgage credit-toGDP
ratio and price growth. LTV limits are not a harmonised measure and its national-level
implementation includes numerous specificities that can hinder cross-country comparisons. As a
result, this thesis proposes a construction of LTV index reflecting specific aspects of the measure.
Using the LTV Index we confirmed a slowdown of credit, mortgage and price growth.