Mortgage regulations can also lead to increased financial vulnerability
What is it about?
Investigating the use of unsecured debt and mortgage lending in Denmark, Sweden, and Norway, and with a detailed analysis of borrowing at or near the regulatory limits on mortgage lending in Norway, we find that when regulators impose mortgage regulations to reduce the growth in debt and reduce the financial vulnerability of households, they may increase the economic exposure of some families.
Why is it important?
Learning about the externalities and possible pitfalls of a widespread regulatory tool such as macroprudential mortgage regulations is essential. With this knowledge, regulators may simultaneously regulate other sources of debt to reduce the risk of mortgage regulations leading to an increased financial vulnerability in households at or near the regulatory limits.