A Bank of England report showed how a cut in the monetary policy affects birth rates.
When mortgage rates drop birth rates rise, a recent report Bank of England report has found.
The results from the ‘Monetary policy and birth rates: the effect of mortgage rate pass-through on fertility’ report showed how a cut in the monetary policy rate affects birth rates.
The results indicated that a 1% reduction in the monetary policy rate, which decreases mortgage payments by 12% on average, leads to a 5% increase in the birth rate among families on an adjustable rate.
The report said at the mean adjustable rate share, this is equivalent to a 2% increase in the UK birth rate.
It estimates that monetary policy in late 2008 and 2009 led to 14,500 additional babies being born in 2009, and increased birth rates by 7.5% over the following three years.
The report read: “Though our paper uncovers a direct effect through the mortgage market, there are many ways that monetary policy indirectly affects birth rates.
“There is ample evidence that monetary policy affects house prices...which have been shown to positively affect fertility decisions...
“There is also evidence that lower mortgage rates positively affect home-buying... and household formation... which are often viewed as pre-cursors to child-bearing.
“And accommodative monetary policy increases labour demand and employment... which also positively affects birth rates.”
