The Impact of Macroprudential Housing Finance Tools in Canada: 2005–10

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This paper combines loan-level administrative data with household-level survey data to analyze the impact of recent macroprudential policy changes in Canada using a microsimulation model of mortgage demand of first-time homebuyers. Policies targeting the loan-to-value ratio are found to have a larger impact than policies targeting the debt-service ratio, such as amortization. This is because there are more wealth-constrained borrowers than income-constrained borrowers entering the housing market.

JEL Code(s): C, C6, C63, D, D1, D14, G, G2, G28