Dr. Conor O'Toole:

When one is trying to consider any credit market interventions, a number of aspects are especially important. It is even more complicated when doing credit market interventions in the housing market because a multitude of factors affect house prices, including the labour market channels, credit access, and supply constraints. There are a range of factors that impact the degree to which any particular credit-based measure would pass through to price pressures or to borrower purchasing power. In a sense, the tailoring and calibration of these schemes is very important. Naturally, any inflationary pressures can be reduced if the schemes are tailored to have the minimum need. For example, this would be ensuring that the calibration of the scheme goes to those borrowers who are most in need, such as to the household that is credit constrained and needs that extra credit to be able to make that transaction happen. In the alternative counterfactual scenario that transaction would not happen. The effective use of calibration parameters can be used to mitigate those channels.

Furthermore, the scale of the intervention is critically important, as we said in the opening statement. For example, how much of the intervention happens in what timeframe is very important. The shorter the timeframe and the larger the intervention that is necessary, and when one considers the economic channels behind that, it would add more demand side pressure in a shorter space of time. The longer the timeframe and the degree to which the intervention is spread out over time would limit the inflationary pressures. When we consider these types of instruments we do so in a manner that takes all of the factors that would affect the housing market, which are multitude and co-determining. If we hold all of these other factors constant on an all-new change to credit market access, that is naturally where we talk about the channels that would be happening in the market with regard to demand and supply side.