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

Grosz, Gabriella and Izsák, Gábor and Palicz, Alexandr Maxim and Szász, Katinka (2023) Improving Access to Credit for First-Time Home Buyers under Borrower-Based Measures. FINANCIAL AND ECONOMIC REVIEW, 22 (2). pp. 25-53. ISSN 2415–9271 (print), 2415–928X (online)

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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. Journal of Economic Literature (JEL) codes: D14, E32, E51, E58, G21, R31

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