Interest rate cuts stimulate more than just house prices
Written by News on 24/12/2019
Cutting interest rates appears to stimulate more than just a rise in house prices – with an extra 14,500 babies born in 2009 after borrowing costs were slashed during the global financial crisis.
Bank of England researchers wanted to see if the influence of central bankers went as far as families considering whether or not to have a baby.
“On average for the UK, a one-percentage-point decline in the policy rate increases birth rates by 2%,” researchers Fergus Cumming and Lisa Dettling said in a statement.
And that figure increased among families paying adjustable-rate mortgages that go up or down along with the BoE’s Bank Rate – with each one-percentage-point reduction seeing a 5% rise in birth rates.
In contrast with Britain, the birth rate in the US fell during the same period.
This was linked to the prevalence of fixed-rate mortgages in and the impact of property price declines.
“Our descriptive comparisons with the US suggest that if more families had been able to obtain a lower interest rate, the US might not have experienced as severe of a ‘baby bust’ in the Great Recession,” they added.
(c) Sky News 2019: Interest rate cuts stimulate more than just house prices
