Using as a starting point the observed heterogeneity and by analysing the experiences of several countries, we can draw certain broad conclusions on the effectiveness of the macroprudential toolbox. The design of Borrower and Capital Based Measures is a decision of authorities. For example, based on information from the ESRB, Belgium introduced a Loan-to-Value on both owner-occupied and buy-to-let properties. Cyprus, in order to deal with a specific sectoral exposure, further to the Loan-to-Value cap, recently introduced an even stricter Loan-to-Value for luxurious properties. However, by observing the real estate cycles registered in a number of countries, it is evident that even the idiosyncratic design of these measures does not always stop real estate cycles from materialising. The Netherlands and Slovenia are examples of countries that have recorded vulnerabilities despite the implementation of such measures. Analysis performed at the Central Bank of Cyprus verifies this observation. Using an econometric model, we explain the growth rates of housing loans and house prices considering the implementation of macroprudential measures2. 1/3  BIS - Central bankers' speeches  The analysis indicates that the Loan-to-Value ratio seems to be effective in containing housing loans, for 10 out of 12 countries in our sample and effective in containing house prices in only in 3 out of the 12 cases. Income based measures (such as DebtService-to-Income) and Capital Based Measures were found to be effective in around half of the countries that use them. We can therefore conclude, that there is no "one-size-fits-all" type of macroprudential tool.

This interconnection, if broken down in its simplest form, has two possible outcomes that relate to financial stability. First outcome, the transmission mechanism of conventional monetary policy includes the ways interest rates directly influence the supply for credit for house purchases and indirectly influence the real economy through house prices3. In the history of conventional monetary policy decisions, the ECB, at times, responded to the presence of excessive credit in order to safeguard its price stability objective. In its August 2006 decision to increase interest rates, the ECB stated that the "stimulative impact of the low level of interest rates in the euro area has been an important factor behind the tendency for money and credit growth to strengthen". In the period of quantitative easing, monetary policy tools expanded to include, among others, targeted operations to stimulate bank lending to the real economy4. These are  2/3  BIS - Central bankers' speeches  linked to a threshold of the banks' loans to non-financial corporations and households. By recognising the impact this tool would have on housing prices, housing loans have been excluded from the this threshold. Given that monetary policy affects real estate developments, the role of macroprudential policy becomes important in addressing idiosyncratic vulnerabilities and as such the independence of macroprudential policy should be safeguarded, especially in a monetary union. The Second outcome is that, an increase in interest rates will increase the monthly loan payments.