Improving Access to Credit for First-Time Home Buyers under Borrower-Based Measures

28 June 2023DOI: https://doi.org/10.33893/FER.22.2.25

Author information:

Gabriella Grosz: Magyar Nemzeti Bank, Senior Economic Analyst. E-mail: groszg@mnb.hu

Gábor Izsák: Magyar Nemzeti Bank, Legal Advisor. E-mail: izsakg@mnb.hu

Alexandr Maxim Palicz: Magyar Nemzeti Bank, Senior Economic Analyst. E-mail: palicza@mnb.hu

Katinka Szász: Magyar Nemzeti Bank, Legal Advisor. E-mail: szaszk@mnb.hu

Abstract:

As a result of the dynamic rise in real estate prices in recent years, house prices, and therefore the minimum down payment required to obtain a mortgage, more than tripled by 2022 compared to 2014. This led to a deterioration of access to borrowing opportunities typically for young first-time home buyers aged 35 or younger, especially among clients who are not eligible for family support schemes. In this paper, we provide a detailed overview of the potential side effects of the borrower-based measure framework on first-time home buyers. Relative to their credit risk, these clients may be more severely affected by borrower-based measures, generating negative second-round effects. Therefore, in their case preferential limits may be applied, in line with international practice, notably on the level of down payment. However, when making such a decision, it is important to take into account the development of risks in the housing and credit markets and the macroeconomic environment.

Cite as (APA):

Grosz, G., Izsák, G., Palicz, A. M., & Szász, K. (2023). Improving Access to Credit for First-Time Home Buyers under Borrower-Based Measures. Financial and Economic Review, 22(2), 25–53. https://doi.org/10.33893/FER.22.2.25

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Column:

Study

Journal of Economic Literature (JEL) codes:

D14, E32, E51, E58, G21, R31

Keywords:

financial stability, real estate overheatedness, excessive lending, macroprudential policy, borrower-based measures, loan-to-value ratio, debt-service-to-income ratio, first-time home buyer

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