Staff Working Paper No. 919
By Belinda Tracey and Neeltje van Horen
Easing mortgage borrowing constraints generates a sizeable local consumption multiplier. Exploiting geographic variation in exposure to the UK’s Help-to-Buy program, which lowered the minimum down payment requirement from 10% to 5%, we find that home purchases in average-exposure districts rose by 18.1%. Instrumenting home sales with ex ante exposure, we estimate elasticities of 0.29 for household consumption and 0.52 for car sales. Three mechanisms drive the response: new home buyers each spend an additional £3,200; their demand stimulates local employment and income; and in tight markets, house prices rise.
This version was updated in March 2026.
The Staff Working Paper was first published on 7 May 2021 under the title ‘The consumption response to borrowing constraints in the mortgage market’.
Mortgage borrowing constraints and the local consumption multiplier
