Instruments designed to mitigate indebtedness

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Title: Instruments designed to mitigate indebtedness
Author: Kauko, Karlo ; Norring, Anni
Organization: Bank of Finland
Series: Bank of Finland. Bulletin
Series volume: 92
Series number: 2/2018
Year of publication: 2018
Publication date: 24.5.2018
Pages: 47-52
Subject (yso): kotitaloudet (organisaatiot); asuntolainat; velkaantuminen
Keywords: makrovakaus; makrovakauspolitiikka; makrovakausvälineet
Other keywords: macroprudential instruments; macroprudential policy; indebtedness; households; housing loans
Abstract: Borrower-based instruments generally refer to measures aimed at mitigating the indebtedness of individuals or households. These instruments have most commonly been used to impose limits on housing loans. The purpose of borrower-based instruments is to contain household indebtedness and prevent house price bubbles. The most common instrument in Europe is the maximum loan-to-value (LTV) ratio for housing loans, i.e. the loan cap, which is also in use in Finland. Research has proven the effectiveness of borrower-based instruments in preventing both price bubbles and excessive indebtedness.
Note: Issue: Financial stability

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