The Bank of England has published a staff working paper that develops a house price-at-risk framework for the UK, aimed at forecasting downside risks to house price growth rather than central projections alone. The model covers the UK as a whole, the nine English regions, Wales, Scotland and Northern Ireland, and finds that the main predictors of the lower tail of house price growth since the 1970s have been transaction growth, changes in mortgage rates, the credit-to-GDP gap and financial stress. The paper finds the framework can be used to estimate downside risks to house price growth and the probability of negative growth up to two years ahead. At the regional level, the paper finds substantial heterogeneity in how house prices respond to the same macro-financial variables. Estimated mortgage rate effects are stronger in supply-inelastic regions, implying sharper price falls when borrowing costs rise and supply cannot adjust quickly. The analysis also finds that higher housing supply is associated with an easing of price pressures in most regions, although the results differ across some areas. The paper argues that combining national and regional models provides a more complete view of housing-market vulnerabilities for macroprudential monitoring.
Bank of England2026-06-26
Bank of England publishes research on UK house price-at-risk model, identifies mortgage rates, credit and financial stress as key downside predictors
The Bank of England has released a staff working paper setting out a UK house price-at-risk model for tracking downside risks to house price growth. It identifies transaction growth, mortgage rate changes, the credit-to-GDP gap and financial stress as the main predictors of tail risks, with forecasting power up to two years ahead. Regional results show stronger mortgage-rate sensitivity in supply-inelastic markets and suggest higher housing supply eases price pressures in most regions.