The Real Consequences of LTV Limits on Housing Choices

65 Pages Posted: 7 Mar 2017 Last revised: 4 Nov 2020

Date Written: May 24, 2019


This paper provides novel evidence on the effects of LTV limits on housing choices. I exploit the 2010 and 2012 introduction of LTV limits in Israel using a detailed loan-level dataset. I find that the LTV limits, which were designed to lower borrowers' risk, resulted in borrowers choosing more affordable housing units, farther from the central business district, and in lower socioeconomic neighborhoods. In addition, those LTV limits increased interest rates and reduced loan amounts. My evidence suggests that macroprudential policies, which focus on the stability of the financial system, thus have micro-implications on location choices, commuting costs, and moving to less-advantaged areas.

Keywords: Macroprudential policy, LTV, mortgage, housing market, household finance

JEL Classification: E43, E58, E61, G21, G28, R28, R51

Suggested Citation

Tzur-Ilan, Nitzan, The Real Consequences of LTV Limits on Housing Choices (May 24, 2019). Available at SSRN: or

Nitzan Tzur-Ilan (Contact Author)

Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States


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