LTV and DTI Limits—Going Granular

Author/Editor:

Luis I. Jacome H. ; Srobona Mitra

Publication Date:

July 15, 2015

Electronic Access:

Download PDF. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

There is increasing interest in loan-to-value (LTV) and debt-service-to-income (DTI) limits as many countries face a new round of rising house prices. Yet, very little is known on how these regulatory instruments work in practice. This paper contributes to fill this gap by looking closely at their use and effectiveness in six economies—Brazil, Hong Kong SAR, Korea, Malaysia, Poland, and Romania. Insights include: rapid growth in high-LTV loans with long maturities or in the number of borrowers with multiple mortgages can be signs of build up in systemic risk; monitoring nonperforming loans by loan characteristics can help in calibrating changes in the LTV and DTI limits; as leakages are almost inevitable, countries strive to address them at an early stage; and, in most cases, LTVs and DTIs were effective in reducing loan-growth and improving debt-servicing performances of borrowers, but not always in curbing house price growth.

Series:

Working Paper No. 15/154

Subject:

English

Publication Date:

July 15, 2015

ISBN/ISSN:

9781513551449/1018-5941

Stock No:

WPIEA2015154

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

41

Please address any questions about this title to publications@imf.org