{
  "title": "Micro-Assessment of Macroprudential Borrower-Based Measures in Lithuania",
  "publication": "IMF Working Papers, October 27, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2023/10/27/micro-assessment-of-macroprudential-borrower-based-measures-in-lithuania-540987",
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  "summary": "Despite having introduced borrower-based measures (BBM), Lithuania's housing and mortgage markets were booming during the low-interest-rate period, casting doubt on the macroprudential toolkit's ability to contain excessive mortgage growth.",
  "sections": [
    {
      "heading": "Research objective and approach",
      "content": "- Objective: Assess the adequacy of borrower-based measures’ (BBMs) parametrization in Lithuania and evaluate whether the BBM package contained excessive mortgage growth and mortgage credit risk during the low-interest-rate period.\n- Methodology: Built a novel lifetime expected credit loss framework grounded on actual loan-level default and household income data."
    },
    {
      "heading": "Key findings",
      "content": "- The BBM package effectively contains mortgage credit risk.\n- Housing loans are more resilient to stress than in the preregulatory era.\n- Calibration exercise results:\n  - (1) In the low-rate environment, income-based measures could have been tighter.\n  - (2) Borrowers taking out secondary mortgages rightly are and should be required to pledge a higher down payment."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Credit risk; Financial institutions; Financial regulation and supervision; Financial sector policy and analysis; Housing prices; Loans; Macroprudential policy instruments; Mortgages; Prices\n- Keywords: Baltics; BBM package; borrower-based measures; calibration exercise; Credit risk; Europe; Global; Housing prices; lifetime expected loss; Lithuania's housing market; Loans; LTV; macroprudential policy; Macroprudential policy instruments; modeling mortgage risk; mortgage credit risk; Mortgages; probability of default"
    },
    {
      "heading": "Practical implications and policy recommendations",
      "content": "- The BBM package increased resilience of housing loans to stress compared with the preregulatory era.\n- Policymakers should consider tighter income-based borrower constraints in prolonged low-rate environments.\n- Higher down payment requirements are justified for secondary mortgages to mitigate elevated risk.\n\nIMF Working Papers — Micro-Assessment of Macroprudential Borrower-Based Measures in Lithuania (Working Paper No. 2023/227), October 27, 2023.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/10/27/micro-assessment-of-macroprudential-borrower-based-measures-in-lithuania-540987"
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    "Authors: Mantas Dirma, Jaunius Karmelavičius",
    "Published: October 27, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400256578.001",
    "Objective: Assess the adequacy of borrower-based measures’ (BBMs) parametrization in Lithuania and evaluate whether the BBM package contained excessive mortgage growth and mortgage credit risk during the low-interest-rate period.",
    "Methodology: Built a novel lifetime expected credit loss framework grounded on actual loan-level default and household income data.",
    "The BBM package effectively contains mortgage credit risk.",
    "Housing loans are more resilient to stress than in the preregulatory era.",
    "Calibration exercise results:",
    "Subject: Credit risk; Financial institutions; Financial regulation and supervision; Financial sector policy and analysis; Housing prices; Loans; Macroprudential policy instruments; Mortgages; Prices",
    "Keywords: Baltics; BBM package; borrower-based measures; calibration exercise; Credit risk; Europe; Global; Housing prices; lifetime expected loss; Lithuania's housing market; Loans; LTV; macroprudential policy; Macroprudential policy instruments; modeling mortgage risk; mortgage credit risk; Mortgages; probability of default",
    "The BBM package increased resilience of housing loans to stress compared with the preregulatory era.",
    "Policymakers should consider tighter income-based borrower constraints in prolonged low-rate environments.",
    "Higher down payment requirements are justified for secondary mortgages to mitigate elevated risk.",
    "**Working Paper**"
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