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Mortgage rate falls boost birth rates – Bank of England

  • 23/12/2019
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Mortgage rate falls boost birth rates – Bank of England
Birth rates enjoy a boost when mortgage rates drop, a report from the Bank of England has suggested.


The working paper, titled Monetary policy and birth rates: the effect of mortgage rate pass-through on fertility by Fergus Cumming and Lisa Dettling attempts to establish precisely what impact a mortgage rate fall has on the nation’s fertility.

And the authors argue that a one percentage point reduction in the monetary policy rate ‒ which on average means a 12 per cent fall in the cost of mortgage payments ‒ leads to a typical rise of two per cent in the UK birth rate.

This increases to a five per cent rise among households where the borrower is on what the researchers term an ‘adjustable rate mortgage’.

As a result, it suggests that the monetary policy of late 2008 and 2009 led to an additional 14,500 babies being born in 2009, and boosted birth rates by 7.5 per cent over the next three years.


Variable rate mortgages

The researchers suggest that one reason that there may be more of a correlation between a fall in interest rates and a rise in birth rates is that a significant number of borrowers in the UK are on adjustable rate mortgages compared to the likes of the US, France and Germany where borrowers are tied into longer fixed term deals.

That’s because these mortgage rate changes have a more direct and immediate effect on borrower finances. 

The report concludes: “Short-term fluctuations in birth rates can also have important effects on the economy. Families who move forward their child-bearing plans will also move forward any associated consumer spending.

“And year-to-year fluctuations in cohorts and class sizes can have important implications for educational attainment and future labour market outcomes.”


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