The Case for Borrower-Based Macroprudential Measures in Spain

Selected Issues Papers, June 29, 2026

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House prices in Spain have risen rapidly since the pandemic, and the share of riskier mortgages at issuance has increased, suggesting a potential buildup of mortgage-related vulnerabilities.
The paper provides analytical inputs to inform the potential design and calibration of borrower-based measures (BBMs), currently not activated in Spain.
It reviews international experience with BBMs and uses Spanish loan-level data and scenario-based stress tests to assess alternative calibrations.
Results suggest that loan-to-value caps would deliver the largest reduction in default risk and mortgage portfolio losses, with additional gains from income-based caps.
BBMs would complement capital buffers by addressing risks at origination.

Loan-to-value caps would deliver the largest reduction in default risk and mortgage portfolio losses.
Income-based caps provide additional gains when combined with loan-to-value limits.
The share of riskier mortgages at issuance has increased since the pandemic, contributing to potential mortgage-related vulnerabilities.
BBMs address origination-stage risks and therefore complement capital buffers.

Consider activation and careful calibration of borrower-based measures (BBMs) in Spain to mitigate a potential buildup of mortgage-related vulnerabilities.
Prioritize loan-to-value caps as they yield the largest reduction in default risk and mortgage portfolio losses.
Use income-based caps alongside loan-to-value caps to obtain additional risk-reduction benefits.
Employ BBMs to complement existing capital buffers, targeting risks at origination rather than through capital alone.