Photographer: Simon Dawson/Bloomberg

The Bank of England Has Its Eye on Every New Mortgage


Bank of England Chief Economist Andy Haldane wants to know whether your home loan is a threat.

Not on its own, of course. But the central bank is collating every U.K. mortgage issued in recent years in an attempt to better understand how to avoid the housing booms and busts that have been such a destabilizing feature in U.K. economic history.

Haldane's team has its work cut out. More than 800,000 mortgages were approved in the past 12 months alone and data Monday showed they rose to a two-year high. 

The BOE is collecting “extremely granular data” on what has been a “very bouncy, cyclical” housing market, Haldane said in an interview on Friday. “It has been very difficult to make sense, to understand, to model the degree of that cyclicality.''

That type of big data analysis — part of the BOE's new research agenda —  is going to come in useful for policy makers as they try to figure out which parts of the property market may be overheating, where pockets of strain are hidden and, crucially, how to tame one area without toppling the whole structure.

Case in point: the central bank's Financial Policy Committee currently has its eye on buy-to-let properties. With a surge in growth, it's worried that investors could amplify an adverse housing shock by trying to dump their properties at the same time.

Haldane says the plan is to:

“model and better understand not just the market for private sales but the market for renting and the mortgage market and the intersection between those moving parts.”

“One of the benefits to understanding that disaggregated approach to the housing market is it allows you to consider the impact of central bank policies, including the sort of policies that we’ve been carrying out.”

Governor Mark Carney has already clamped down on the market by putting a cap on the number of high loan-to-income mortgages that can be approved.

But that's barely slowed demand. In addition to low interest rates and record employment, housing activity is also getting an impetus from rental investors snatching up property before a tax change in April.

“If you're not separately modelling the mortgage market, it is quite hard to shoe-horn in macroprudential policy,” Haldane said. “At a time when the bank has been given these extra responsibilities, and these extra tools, we need the technology, models, approaches, data.”

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