James Waddell and Meghna Shrestha An increasing number of households in the UK are opting for longer-term mortgages, with the share of borrowers taking out new mortgages with terms 30 years or longer tripling since 2005. But who are these households, why have they done so, and what could this imply for financial stability? This … Continue reading 30+ year mortgages – are these the new norm? What does this mean for financial stability?
Financial Stability
Gabija Zemaityte The Tony Blair Institute for Global Change, among others, has argued that long-term fixed-rate mortgages (LTFRMs) could increase home ownership in the UK. The share of mortgages with longer fixes increased in the UK and internationally over the last decade. Persistently low interest rates over that period have supported demand for longer-fix products, … Continue reading Long-term fixed-rate mortgages through an international lens: could they lead to higher home ownership?
Ioana Neamțu, Umang Khetan, Jian Li and Ishita Sen What do the 2023 Silicon Valley Bank collapse and the 2022 UK pension fund crisis have in common? Interest rate risk. Several sectors in the economy run significant asset-liability mismatch that makes them vulnerable to rapid interest rate changes: pension funds and insurers have short-term cash … Continue reading Sharing interest rate risk: who is trading and what affects the costs?
Neha Bora, Sarah Burkinshaw, Alice Crundwell and Tuli Saha Private equity (PE) has rapidly become an important source of financing for UK businesses. Funds use pools of capital, largely from institutional investors, to primarily invest in non-publicly traded companies. We shed light on this growing sector with a new and novel data set of around … Continue reading Shining a light on private equity backed corporates in four findings
Colm Manning and Alice Crundwell No country is an island – in terms of economics at least, if not geography. Trade and capital link all the economies of the world. Relative to GDP, the UK has more foreign assets and liabilities than any other large economy. These external liabilities – UK assets owned by overseas … Continue reading We are not an island: how have the UK’s external balance sheet risks changed over the past two decades?
Leo Fernandes, Harkeerit Kalsi, Nicholas Vause, Matthew Downer, Sarah Ek and Sebastian Maxted Hedge funds and other alternative investment funds (AIFs) often take positions in financial markets that significantly exceed their investors’ capital by using debt or derivatives. However, such ‘leverage’ can pose risks to financial stability. Regulators seeking to reduce these risks may consider … Continue reading A simple model of the effects of entity and activity constraints on alternative investment funds
Vania Esady and Stephen Burgess A summary measure for UK households’ resilience High levels of household debt have been shown to amplify recessions. For example, in the global financial crisis (GFC), UK households with more debt tended to cut back their spending disproportionately, amplifying aggregate demand effects and potentially making the recession worse. High levels … Continue reading A summary measure for UK households’ resilience
Tihana Škrinjarić How effective is macroprudential policy and how should policymakers measure its stance? My recent paper surveys the literature on the topic of Growth-at-Risk (GaR), which has been developed as a methodology to provide answers to these questions by relating the effects of macroprudential policy tools to real-economy dynamics. While the results are mixed, … Continue reading Growth-at-Risk for macroprudential policy stance assessment: a survey
Michael Kumhof and Mauricio Salgado-Moreno While ‘unconventional’ balance-sheet policies like quantitative easing (QE) and quantitative tightening (QT) appear to have been successful, it is difficult to separate their macroeconomic and financial stability implications from those of other polices. Hence, in a recent paper, we develop a theoretical framework, focusing on the central bank’s liabilities, that … Continue reading Central bank balance sheet policies and the market for reserves
David Glanville and Arif Merali Short term interest rate (STIR) futures are the bedrock of interest rate markets, used to price expectations of central bank policy rates and other UK rate derivative markets such as swaps and options (see Figure 1). They are key for the transmission of monetary policy and provide an avenue for … Continue reading Caring for the ‘future’