Baby boom: Did lower UK mortgage rates increase births?

BoE research shows the United Kingdom saw 14,500 more babies born after the central bank lowered interest rates in 2009.

    In a paper published December 20, Bank of England researchers noted the effect of monetary policy on childbearing, showing a rise in birthrates when official rates were lowered by the central bank [File: Toby Melville/Reuters]
    In a paper published December 20, Bank of England researchers noted the effect of monetary policy on childbearing, showing a rise in birthrates when official rates were lowered by the central bank [File: Toby Melville/Reuters]

    Cutting interest rates appears to stimulate more than just the economy.

    Researchers at the United Kingdom's Bank of England (BoE) say an extra 14,500 babies were born in 2009 after the central bank slashed borrowing costs during the global financial crisis.

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    BoE researchers Fergus Cumming and Lisa Dettling wanted to see if the influence of central bankers went as far as families considering whether or not to have a baby.

    They estimated that for each one-percentage-point reduction in benchmark interest rates, birthrates rose by five percent among families paying adjustable-rate mortgages that go up or down along with the BoE's rates.

    "On average for the UK, a one-percentage-point decline in the policy rate increases birthrates by 2 percent," they said in a paper published on Friday.

    In contrast with the UK, the birthrate in the United States fell during the period studied by the researchers, something they linked to the prevalence of fixed-rate mortgages in the US and the effect of property price declines.

    "Our descriptive comparisons with the US suggest that if more families had been able to obtain a lower interest rate, the US might not have experienced as severe of a 'baby bust' in the Great Recession," the researchers said.

    SOURCE: Reuters news agency