Jose Luis Peydro, Imperial College
Title: “Macroprudential Policy, Mortgage Cycles and Distributional Effects: Evidence from the UK”.
Abstract: “We analyse the distributional effects of macroprudential policy on mortgage and house-price cycles. We exploit the UK mortgage-register and a 2014’s 15%-limit imposed on lenders’ high loan-to-income (LTI) mortgages. Constrained lenders issue fewer and more expensive high-LTI mortgages. Unconstrained lenders strongly substitute high-LTI loans in local areas with higher constrained-lender presence, but not high-LTI loans to low-income borrowers (consistent with adverse selection problems), leading to lower overall credit to low-income borrowers and lower house-price growth in policy-affected areas. Following the Brexit referendum (a negative aggregate shock), the policy-affected areas experience better house-price growth and lower mortgage defaults for low-income borrowers.