Latest articles
The buy-to-let sector and financial stability
Published 15 December 2023
This Bulletin reviews developments in the UK buy-to-let (BTL) market and analyses the channels through which the sector could present financial stability risks. We define the BTL sector as properties that are privately rented and owned with an outstanding mortgage. Some 19% of UK households are private renters, and about 45% of them live in a home with a BTL mortgage. Overall, the BTL market makes up a modest share of the UK’s housing stock – about 9% by number. But it represents a significant financial asset for many landlords and amounts to about £300 billion of outstanding mortgage debt concentrated in systemically important UK banks, equivalent to about 18% of the overall mortgage market.
The buy-to-let sector and financial stability
Financial stability buy/sell tools: a gilt market case study
Published 20 November 2023
This article describes the Bank of England’s 2022 gilt market intervention to support UK financial stability. It outlines the principles underpinning the design of this intervention and considers how these were applied in practice. The growing role of market-based finance has led to increased discussion of central bank use of temporary asset buy/sell tools in order to protect financial stability in a stress, building on their role as ‘lenders of last resort’. Amid severe dysfunction in the UK government bond market in September 2022, when distressed forced selling of gilts by liability-driven investment (LDI) funds led to fire-sale dynamics, the Bank of England launched a temporary and targeted backstop gilt purchase facility. Once the risks to market dysfunction were judged to have subsided, the Bank sold these gilts in a timely but orderly way using a demand-led approach. While the detailed design of financial stability buy/sell tools will depend on the particular shock faced, this article sets out aspects of the Bank’s experience in the 2022 LDI episode that may have a wider application, and draws some lessons from them.
Financial stability buy/sell tools: a gilt market case study
Enabling innovation through a digital pound
Published 24 August 2023
The relevant authorities in the UK have indicated that a central bank digital currency, in wholesale or retail form – known as a digital pound – is likely to be needed. One of the main motivations for a digital pound is that it should promote innovation in domestic payments. Against this backdrop, this article explores the academic literature on innovation for lessons on how to design a digital pound to encourage innovation in the payments ecosystem.
Enabling innovation through a digital pound
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