The Anatomy of the Transmission of Macroprudential Policies

We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—affect residential mortgage credit house prices as well other asset classes not directly targeted by limits. Loan-level data suggest that is reallocated from low- to high-income borrowers urban rural counties. This reallocation weakens feedback between slows price growth in “hot” housing markets. Banks whose lending households more affected constraint drive this reallocation, but also substitute their risk-taking into holdings securities corporate credit.