Inefficient Regulation: Mortgages versus Total Credit

62 Pages Posted: 28 May 2021 Last revised: 17 Apr 2023

See all articles by Artashes Karapetyan

Artashes Karapetyan

ESSEC Business School

Jens Soerlie Kvaerner

Tilburg University

Maximilian Rohrer

NHH - Norwegian School of Economics

Date Written: March 18, 2023

Abstract

We estimate the willingness-to-pay to bypass a loan-to-value (LTV) cap. Our identification relies on exogenous variation in debt exempt from the LTV regulation that can only be used as a substitute for a personal mortgage. Our baseline estimate reveals that homebuyers pay 7.3 SEK to avoid 1 SEK of equity down payment. The supply of debt not part of the LTV calculation increased by approximately 50% within two years after the LTV regulation. Financially weaker households drive the results.

Keywords: Loan-to-value; macroprudential regulation; mortgages; regulatory arbitrage

JEL Classification: D14; G23; G28; G51; R30

Suggested Citation

Karapetyan, Artashes and Soerlie Kvaerner, Jens and Rohrer, Maximilian, Inefficient Regulation: Mortgages versus Total Credit (March 18, 2023). Available at SSRN: https://ssrn.com/abstract=3854860 or http://dx.doi.org/10.2139/ssrn.3854860

Artashes Karapetyan (Contact Author)

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

Jens Soerlie Kvaerner

Tilburg University ( email )

Warandelaan 2
Tilburg, -- 4818HK
Norway
40242704 (Phone)
0364 (Fax)

HOME PAGE: http://www.jenskvaerner.com/

Maximilian Rohrer

NHH - Norwegian School of Economics ( email )

Helleveien 30
N-5045 Bergen
Norway

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