Of course, extension of credit to new borrowers at a time of diminishing spreads coupled with little understanding of risks may be a source of concern regarding financial stability, especially if house prices become stretched. 2  BIS Review 13/2007  This brings me to a second issue, of housing finance as a channel of monetary transmission.
Obviously, as households take on more housing debt, they react faster and more strongly to interest rate movements, thus allowing the Central Bank through their interest rate policy to have a greater influence on macroeconomic activity. A faster and fuller pass-through of interest rates facilitates the conduct of monetary policy and enhances its effectiveness.