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Bitesize: Fixing ideas – The Slowing of Interest-rate Pass-through to Mortgagors
When choosing a mortgage, a key question is whether to choose a fixed or variable-rate contract. By choosing the former, households are unaffected by official interest-rate decisions for the length of the fixation period. We can use transaction data on residential mortgages to get a sense of how long it takes interest-rate decisions to filter through to people’s finances. The chart below shows how interest-rate pass-through has changed over time. The green line shows how long the average new mortgagor has to wait before monetary policy decisions affect monthly repayments. Before the Financial Crisis, people had just ... (full story)