Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
How Central Banks Use Loan-to-Value Caps to Cool Housing Markets
Episode 41 of Monetary Policy Explained with Fexingo. Lucas and Luna dive into loan-to-value (LTV) caps—a targeted macroprudential tool central banks use to rein in housing bubbles without raising interest rates for the whole economy. They anchor on New Zealand's experience in 2021, when the Reserve Bank of New Zealand tightened LTV limits on investors to 40% equity required, then reversed them in 2023 as the housing market cooled. Lucas explains how LTV caps differ from blunt rate hikes: they constrain only new lending to high-leverage borrowers, leaving auto loans and business credit…
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