New IMF research arrives on loan-to-value (LTV) caps and limits on debt-service-to-income (DTI), a hot topic after the Central Bank moved to calm the house market here.

The Washington crowd, who say little is known about how such instruments work in practice, took a look at their use in Brazil, Hong Kong, South Korea, Malaysia, Poland and Romania. The salient finding for us is that LTVs and DTIs are effective in reducing loan growth and improving the debt-service capacity of borrowers. But two IMF researchers say such measures were “not always” effective in curbing house price growth.

True, the recent Irish loan curbs are not wholly comparable as they centre on a mix of LTV and loan-to-income caps. Still, the research casts light on how interventions of this nature operate. They might protect banks from financial shock but they would not appear to be a particularly effective lever for controlling house price inflation.

“The measures, in general, did not affect house price growth, except in one case,” say Luis Jácome and Srobona Mitra. “With the exception of Korea, none of the studies found that the macroprudential measures were effective in reducing house price growth; this was especially so for countries that faced persistent housing demand and capital inflows.”

Tentative Irish evidence points to moderation in the rate of price growth generally and a speedier advance in prices outside Dublin since the Central Bank stepped in. It’s still far too early, however, to say what the eventual impact of the Central Bank loan caps will be.

The IMF duo make another interesting point. “For instance, measures aimed at speculative properties and regions in Korea seemed to be effective in reducing the acceleration of real estate prices in these regions.” Given Ireland’s sorry encounters with speculative property lending, that’s one to note.