I have absolutely no idea what "bindingness" means.
The research finds that increasing shares of new mortgage holders, almost one in five, are borrowing at the limits. The research points that the mortgage measures have become increasingly binding in recent years, as would be expected in a market where house prices have been rising faster than incomes in the context of housing supply constraints.
I need to borrow €200k to buy a house, but the LTV or LTI rules limit me to €170k
So I am "bound" by the limits?
If the limits were looser, the bindingness would be lower?
If the limits were tighter, the bindingness would be higher?
Surely there must be a better word and better title for the paper?
“A Measure of Bindingness in the Irish Mortgage Market”,
They [The Central Bank rules] transmit through the direct lending channel,
whereby the level of bindingness alters the size and number of loans relative to a
counterfactual with no measures. This Note provides a measure of bindingness by
combining estimates of credit available and take-up for individual Irish borrowers.
I put this into Google Simplify and it came up with:
If the measures were not in place, people would borrow more. This Note measures the extent to which borrowers were limited in the amount they borrowed by the Central Banks limits (c) Google Simplify .
We derive a threshold
measure of bindingness, defined as the proportion of borrowers with take-up greater
than 90 per cent. This allows for a consistent measure of bindingness across subgroups and
time, which equates to the group of borrowers who likely took on less debt than they would
have had in the absence of the Measures
Results show the proportion of bound borrowers rose from 29 to 46
per cent since the introduction of the Measures. Recently, there has been a stabilisation of
bindingness for borrowers within the limits, reflective of the recent supply increase after a
prolonged period of supply shortage in the housing market. For the Measures to address
these cyclical pressures, bindingness will evolve over the cycle to mitigate the potential
negative impact on borrower affordability and resilience. The rich set of borrower characteristics
also allows for the estimation of some of the distributional impacts of the Measures.
In the first half of 2019, first time and Dublin buyers have significantly higher levels
of bindingness reflecting the high level of Dublin house prices relative to incomes compared
to other parts of the country.
I put this into Google Simplify and came up with
46% of borrowers now borrow more than 90% of what they could borrow.
Before the limits came in, only 29% did so.
More Dubliners and First Time Buyers borrowed more than 90% of what was available to them.
(c) Google Simplify .