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

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