The impact of macroprudential housing finance tools in Canada

BIS Working Papers No 632
May 2017

Paper produced as part of the BIS Consultative Council for the Americas (CCA) research project on "The impact of macroprudential policies: an empirical analysis using credit registry data" implemented by a Working Group of the CCA Consultative Group of Directors of Financial Stability (CGDFS).

This paper combines loan-level administrative data with household-level survey data to analyze the impact of recent macroprudential policy changes in Canada using a microsimulation model of mortgage demand of first-time homebuyers. Policies targeting the loan-to-value ratio are found to have a larger impact on demand than policies targeting the debt-service ratio, such as amortization. In addition, we show that loan-to-value policies have a larger role to play in reducing default than income-based policies.

JEL classification: D14, G28, C63

Keywords: macroprudential policy, household finnance, microsimulation models