"...the extent to which surging houseprices have more generally been driven by an increase in credit availability or leveraged mortgage lending as financial liberalisation,deepening and innovation progressed throughout the EU is relevant from a macro-prudential perspective.""Undoubtedly, banks have to a certain degree contributed to inflating house prices as they stimulated housing demand through two channels:
-first, by easing credit rationing as they increasingly transferred the corresponding credit risk in itself entailing arisk of moral hazard – which both freed liquidity for renewed lending and probably triggered an erosion of credit standards, and,
-second, by having tended, in many jurisdictions, to ease credit standards directly in an attempt to maintain or gain market share in response to rising competitive pressures in mortgage markets, which – through improved housing financing conditions and, hence, affordability –added to housing demand"
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