Heterogeneous effects and spillovers of macroprudential policy in an agent-based model of the UK housing market.

This article develops an agent-based model (ABM) of the UK housing market to analyze the heterogeneous effects and spillovers of macroprudential policies, specifically focusing on two regulatory experiments: a hard loan-to-value (LTV) limit and a soft loan-to-income (LTI) limit. Calibrated with extensive micro-data including UK mortgage and real estate datasets, the model captures detailed household dynamics across segments such as first-time buyers (FTBs), home movers (HMs), buy-to-let (BTL) investors, and renters, incorporating life-cycle behavior and market interactions. The findings indicate that these macroprudential policies mitigate house price cycles by reducing credit availability and leverage, affect multiple risk metrics beyond their direct targets, and cause compositional shifts in housing tenure—reducing owner-occupier access (especially for FTBs) while benefiting BTL investors, which in turn influences the rental market by increasing both rental demand and supply. The study highlights the importance of considering heterogeneous agent behavior and cross-market spillovers when designing housing market policies and suggests avenues for future research including embedding the model in a broader macroeconomic framework and exploring additional policy tools.