Lower mortgage rates lead to higher birth rates!

Lower mortgage rates lead to higher birth rates!

Posted on January 29, 2020 at 9am

A report from the Bank of England indicates that when mortgage rates drop, birth rates rise.

The working paper, called ‘Monetary policy and birth rates: the effect of mortgage rate pass-through on fertility’ by Fergus Cumming and Lisa Dettling investigated the influence a mortgage rate reduction has on the number of pregnancies in the UK.

Cumming and Dettling’s report demonstrates that a 1% fall in the monetary policy rate (which on average equates to a 12% reduction in the cost of mortgage payments) typically leads to a 2% increase in the UK birth rate and this figure increases to 5% amongst homes where the mortgage is on an adjustable rate.

It also found that when the Bank of England lowered its policy rate by 4.5% between 2008 and 2009, it affected family planning decisions over the next three years, and increased birth rates by 7.5% in that time.

The report indicates that one reason that there may be a relationship between a fall in interest rates and a rise in birth rates is that a considerable number of mortgages in the UK are on adjustable rates whereas borrowers in the US, France and Germany are tied into longer fixed term deals.

The reason being that the variance to mortgage rates has an instantaneous effect on homeowners’ finances.

Cumming & Dettling finish “short-term fluctuations in birth rates can also have important effects on the economy.

Families who move forward with 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 labor market outcomes.

Overall, our paper suggests monetary policy can have spillover effects on a host of economic and social outcomes.”

Low interest rates

Whilst the interest rates remain low, it is a good idea to review your mortgage and see if you can lock into a rate to help you budget more easily and be secure in the knowledge that you know what your mortgage rate will be for a period of time.

To discuss your options please click here to request a call back from one of our advisers.

Written by: Kay Crooke – Associate Practice Director, Prosser Knowles Associates Limited

Stay in touch

If you would like to keep up to date with current industry trends or receive details of our product developments, seminars, events and newsletters, just fill in your details below.

News Feed

Talking with Anna Lawrence

Anna Lawrence, Financial Planning Consultant at Prosser Knowles Associates Limited, chats with Kay Crooke (via...

Perfect time to review your finances

In times like these, we are forced to review our circumstances, adapt to the new situation and make whatev...

Cost reductions now available to families

Marketplace As a completely independent firm, we are constantly reviewing the marketplace to ensure both th...

Shielding your family from financial worries

Like for so many of us, 2020 has not been the year we expected. It seems to have thrown everything at us: stor...

Dandelions are resilient and so are we.

I hope this message finds you, your family, friends and colleagues physically and mentally well. New Norm...

Video conferencing – how to use zoom

We are now able to offer meetings via video conferencing using Zoom, Microsoft Teams, Facetime, etc as an alte...

Alarming £19bn left unclaimed in UK pension pots

Have you kept track of where all your pensions are and notified your pension providers when you have moved hou...

Coronavirus Update #7

Written by Square Mile Investment Services. Markets have rallied from their recent lows, and valuations are...

Quarter 1 (2020) Market Update

Quarter 1 (2020) investment market update provided by Jason Broomer, Head of Investment, from Square Mile Inve...

Coronavirus Update #6

Written by Square Mile Investment Services. With the FTSE 100 standing at around 6,000, Square Mile has sai...

Coronavirus Update #5

Written by Square Mile Investment Services. Dividends are normally a reliable indicator of company health....

Coronavirus Update #4

Written by Square Mile Investment Services. There is no doubt that the global economy is heading for a deep...

Managed Portfolio Service Update

Managed Portfolio Service Update - Q1 2020 Quilter Cheviot, one of the discretionary fund managers we use to...

Coronavirus Update #3

Written by Square Mile Investment Services. Markets continue to be amazingly volatile with the S&P...

Coronavirus Update #2

Written by Square Mile Investment Services. There is some sense that markets are beginning to feel somewhat...