City Research Online

Macroprudential Policy, Mortgage Cycles and Distributional Effects: Evidence from the UK

Peydró, J-L., Rodriguez Tous, F. ORCID: 0000-0001-8394-2770, Tripathy, J. & Uluc, A. (2023). Macroprudential Policy, Mortgage Cycles and Distributional Effects: Evidence from the UK. The Review of Financial Studies, hhad070. doi: 10.1093/rfs/hhad070


We analyse the distributional effects of macroprudential policy on mortgage cycles by exploiting the UK mortgage-register and a 2014’s 15%-limit imposed on lenders’ high loan-to-income (LTI) mortgages. Constrained lenders issue fewer and more expensive high-LTI mortgages, with stronger effects on low-income borrowers. Unconstrained lenders strongly substitute high-LTI loans in local-areas with higher constrained-lender presence, but not high-LTI loans to low-income borrowers—consistent with adverse selection problems— implying lower overall credit to low-income borrowers. Consistently, policy-affected areas experience lower house-price growth post-regulation and, following the Brexit referendum (negative aggregate shock), better house-price growth and lower mortgage defaults for low-income borrowers.

Publication Type: Article
Additional Information: This is a pre-copyedited, author-produced version of an article accepted for publication in The Review of Financial Studies following peer review. The version of record will be available online at:
Publisher Keywords: macroprudential policy; mortgages; credit cycles; inequality; house prices
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
[thumbnail of LTI_limits_Accepted.pdf] Text - Accepted Version
This document is not freely accessible due to copyright restrictions.

To request a copy, please use the button below.

Request a copy


Add to AnyAdd to TwitterAdd to FacebookAdd to LinkedinAdd to PinterestAdd to Email


Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login