Cover IMF Working Papers
LTV and DTI Limits—Going Granular
Author: Mr. Luis Ignacio Jácome and Ms. Srobona Mitra
Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 154
Language:
English
Publication Date:
15 Jul 2015
DOI:
https://doi.org/10.5089/9781513551449.001
ISBN:
9781513551449
ISSN:
1018-5941
Pages:
41
Keywords:
WP; loan-to-value; borrower; auto loan; loan; financial stability; macroprudential policy; loan-to-value ratios; debt-service-to income ratios; house price growth; credit growth; DTI limit; DTI measure; loan tenor; LTV-DTI policy; DTI ratio; housing loan; Mortgages; Loans; Housing prices; Credit; Macroprudential policy instruments; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund