BoE paper explores link between mortgage debt and consumption
Tighter credit conditions and concern over debt repayments may have led to drop in consumption
Spending cuts associated with debt may have reduced aggregate private consumption by as much as 2% after the financial crisis, on the back of concerns over tighter credit conditions and the ability to repay debt, a Bank of England working paper has said.
Philip Bunn and May Rostom discuss the relationship between mortgage debt and consumption through analysis of household-level microdata in Household debt and spending in the United Kingdom.
The 2% drop is suggestive of an "unwinding of faster
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