Modelos teóricos de autoevaluación

3.10.1 Cross-border surveys

A few countries since the late 1990s have operated LTV and DTI restrictions. Analysis of their effectiveness has been limited. This is probably due to the idiosyncrasies of the housing markets in each jurisdiction and the complexity caused by other interventions including, government housing policies, taxation and macroeconomic actions.

Nevertheless, there are some general lessons which may be drawn from the experience of others. This section looks at the five major cross-border surveys in this area. This is

followed by a review of the results and issues found in five individual jurisdictions (ie Sweden, Korea, Israel, New Zealand and Hong Kong). Finally, reference is made to the introduction of LTV and DTI restriction in the Republic of Ireland in 2015. The Irish central bank has tried to learn from other jurisdictions and to apply its policies in its own context although it is too early to analyse the results for these measures.

Supra note 119, (Cunliffe at Goobey Lecture, 2016)

142

Mark Stephens and Peter Williams, ‘Tackling housing market volatility in the UK: a progress report’,

143

3.10.2Multi-jurisdictional surveys

A review of some 2,800 banks across forty-eight countries over the period 2000-2010 found that LTV and LTI policies had a statistically significant effect on reducing bank balance sheet asset growth.144 This is in contrast to counter-cyclical capital measures which had no such effect.145 Another surveybased on seventy-four banks in Asia across eleven economies between 2000 and 2014 found that macroprudential policy in Asian countries used housing based tools rather than other policies to curb credit growth. This review found that LTV and DTI limits, higher risk weights requirements on mortgage loans and the taxation of land and property had the biggest effects.146

Another survey of fifty-seven economies over some thirty years from 1980 found that policies limiting the supply of credit by increasing its cost had “little or no detectable effect on the housing market.”147 However, DTI measures were more effective in controlling the demand for credit than LTV policies probably because rising property prices negated the latter’s effect.148 It is interesting to note that neither set of actions had any clear effect on house prices.149

A survey of 119 countries between 2000 and 2013 found that LTV and LTI limits were “associated with reductions in the growth rates in credit and house prices”. These 150 actions, together with leverage limits and dynamic provisioning were particularly effective

Stijn Claessens, Swati Ghosh, and Roxana Mihet, ‘Macroprudential policies to mitigate financial system 144

vulnerabilities’, (2014) IMF Working Paper WP/14/55, 17. See also earlier work by Cheng Lim and others ‘Macroprudential policy: what instruments and how to use them? Lessons from country experiences’, (2011), IMF working Paper 11/238, 27

Ibid, 17 (Claessens, Ghosh and Mihet) 145

Longmei Zhang and Edda Zoli, ‘Leaning against the wind: macroprudential policy in Asia’, (2014) IMF 146

Working Paper WP/14/22, 9 and 30

Kenneth Kuttner and Ilhyock Shim, ‘Can non-interest rate policies stabilise housing markets? Evidence 147

from a panel of 57 economies’, (2013) BIS Working Papers No 433, 24-25

Ibid, 24-25. Chapt 2, n116, (CGFS Papers No. 48), 56-57, which suggests that the DTI policies work 148

better during periods of rapid house price inflation since income levels do not rise as fast. See also Gabriele Galati and Richhild Moessner, ‘What do we know about the effects of macroprudential policy?’, (2014) DNB Working Paper No. 440

Supra note 147, (Kuttner and Shim), 24-25 149

Eugenio Cerutti, Stijn Claessens, and Luc Laeven, ‘The use and effectiveness of macroprudential

150

although the evidence of their effectiveness is weaker “in financially more open economies and those economies that have deeper and presumably more sophisticated financial systems, suggestive of some evasion.” 151

It has been pointed out that these multi-jurisdictional surveys fail to take account of important local characteristics, including the quality of microprudential supervision, the phasing of local credit expansions and contractions, fiscal policies in relation to housing and the role of capital markets and non-bank financial institutions.152 Moreover, the range of countries is very wide including a host of different political systems and economic conditions. In other words, there are probably too many variables to draw any useful conclusions. Consequently, it may be more useful to consider a number of specific jurisdictions that have employed LTV and LTI measures in recent years.

The next section analyses a representative group of jurisdictions; some are selected both for the period of time over which they have deployed LTV and LTI policies and the intensity of their application and others because they display, clearly, some of the fundamental issues with the use of these instruments. Some jurisdictions have been excluded, since their residential property macroprudential policies are so entwined with their taxation systems that it is very difficult to assess the success or failure of the former. For example, the Netherlands introduced a cap on LTV lending in 2013 of 105%, set to decrease to 100% by 2018.153 Not only is this a very high LTV but new mortgages qualify for interest tax deductibility, which has a distorting effect on the market.

Canada presents particular issues. It is difficult to discern what is happening in the Canadian housing market since there are a large number of factors influencing both the process and outcomes. First Canada is not one market but several with areas such as the Toronto metropolitan district, British Columbia and the other western provinces operating as distinct markets with very different dynamics to each and the rest of the country. 154 Moreover, the mortgage market is dominated by the big four federally regulated banks and

Ibid, 3

151

Supra, chapt 2, n105, (Claessens, ‘An overview of macroprudential policy tools’) 152

Supra, note 131, (Darbar and Wu), 15-16 153

Lawrence Schembri, ‘Housing finance in Canada: looking back to move forward’, (November 2014)

154

almost all high-LTV mortgages must have credit insurance issued by the Federal Canada Mortgage and Housing Corporation (CMHC) or equivalent private sector insurer. Since 155 2008 the government has changed its restrictions on LTVs and debt service ratios

especially for investment properties and limited access to mortgages for those with poor credit scores. In addition, limited competition among lenders, a high propensity for 156 borrowers to pay down their mortgages as early as possible and the introduction of a very high foreign-buyer tax in 2016 in British Columbia and a year later in Toronto make it further difficult to draw broad lessons from the Canadian experience of LTV measures. 157 These measures appear to have been effective for owner-occupied properties while “the growth of residential investment recovered to levels above those before the first round of tightening... and that most effects have since dissipated.” 158

Both Korea and Hong Kong are included since they both adopted LTV and DTI limits following the Asian financial crisis in the 1990s and consequently have the longest history of the application of these policies and their effectiveness. Sweden is covered since it highlights the less than coordinated approach to macroprudential and monetary policies.159

This chapter also considers Israel’s macroprudential LTV policies since it highlights issues where LTV policies were challenged as part of the social and political process. New

Zealand is included rather than Eire since the latter’s LTV and LTI limits were introduced more recently in 2015 and are similar to those recently set by the Bank of England and are largely modelled on the New Zealand policies.160

Ibid, 48

155

Jason Allen and others, ‘The impact of macroprudential housing finance tools in Canada: 2005–10’,

156

(August 2016), Bank of Canada Staff Working Paper 2016-41,1

Ontario, Ministry of Finance web-site, ‘Fair Housing Plan: Non-Resident Speculation Tax’, https:// 157

www.fin.gov.on.ca/en/bulletins/nrst/nrst.html, (accessed 21st September 2017)

Martin Kuncl, ‘Assessment of the effects of macroprudential tightening in Canada’, (August 2016), Bank

158

of Canada Staff Analytical Note 2016-12, 5

Wall Street Journal, ‘Sweden plans tighter mortgage rules to tackle household debt - Swedish financial

159

watchdog seeks to cool borrowing as interest rates remain low’, (11th November 2014), “The central bank, the Riksbank, has long warned that Swedish private debt levels are rising too rapidly”

Irish Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Housing Loan Requirements) 160

Sweden

Swedish macroprudential policy is governed by the Swedish Council for Cooperation on Macroprudential Policy with joint representation by the Riksbank (the central bank) and the Finansinspektionen (the financial supervisory authority with the roles of promoting stability and efficiency in the financial system as well as ensuring consumer protection). The Council was concerned about increasing mortgage lending and especially the increase in new lending and higher LTVs. Shortly afterwards, in 2013, the Council was replaced by 161 the Financial Stability Council chaired by the Minster for Financial Markets with

representatives from the Finansinspektionen, the Swedish National Debt Office and Sveriges Riksbank. Macroprudential regulation is the responsibility of 162

Finansinspektionen since it already undertakes microprudential regulation and it appeared convenient to have both areas covered by the same body. It is also possible that there was a political purpose in this arrangement, since Finansinspektionen is a government agency. Nevertheless, the Riksbank, as an independent central bank, still issues its regular

financial stability reports and, as mentioned earlier, has continued to express concern about the lack of clarity regarding who has responsibility for macroprudential regulation. 163 A LTV limited of 85% was introduced in 2010, but Finansinspektionen appears not to have the power to introduce a LTI restriction and Swedish households remains, paradoxically, one the highest savers and most indebted in Europe. Finansinspektionen has also 164 imposed requirements that all new mortgages with LTVs over 70% must be paid down to at least 50% of LTV at a rate of 2% each year.165

Council for Cooperation on Macroprudential Policy minutes, (1st October 2013)

161

Swedish Riksbanks website: The Council for Cooperation on Macroprudential Policy/Financial Stability

162

Council (from 2013), http://www.riksbank.se/en/Financial-stability/The-Financial-Stability-Council/Council-for- cooperation-on-macroprudential-supervision/ (accessed 29th June 2017)

Riksbanks, ‘Financial Stability Report ‘, (2015:2), 16-17. The report has also recommended changes to a

163

variety of areas such as the level of mortgage interest allowed for tax deduction purposes and standardised affordability tests as part of the credit assessment by the lender, pages 20-21

ESRB, ‘Vulnerabilities in the EU residential real estate sector’, (November 2016),117-121

164

Finansinspektionen, ‘Amortisation requirement for new mortgages’, (11th March 2015)