Refinancing at higher rates might not cut consumption – BoE paper
Homeowners’ ability to modify loan terms could weaken monetary policy transmission, study finds
Refinancing mortgages at higher interest rates can increase consumption as some homeowners modify loan terms and generate more disposable income, a working paper from the Bank of England (BoE) has found.
The study, published on December 20, reviews the monthly balance sheets of UK mortgage holders from 2021 to 2023, a period characterised by rapidly increasing borrowing cost due to monetary tightening from the BoE.
Mortgages in the UK are typically set at a fixed rate with a fixed term ranging
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