Bank Underground is about to take a break for the festive season. In keeping with tradition, we are pleased to present the annual Bank Underground Christmas Quiz! This year, it’s been prepared with the kind assistance of the Bank of England’s Archive team. We hope you enjoy testing your knowledge of the Bank’s history, especially how it has marked Christmas in years past. We wish our readers a very happy festive season!
Continue reading “The Bank Underground Christmas Quiz 2025”Katherine Blood
We have developed a new measure tracking UK commercial real estate (CRE) ownership at property level, mapping the latest investor landscape at end-2025 Q3 and its shift since the pandemic. Our estimates show a diversified, international base: overseas investors hold around one third of UK CRE, while private equity funds own 8% after post-pandemic growth. Investor-owned CRE has tilted towards warehouses, logistics, rental housing and properties serving innovation-led sectors – like data centres and life-sciences. Why does this matter? CRE ownership shapes how shocks play out – affecting refinancing waves, upgrade costs and valuation swings. History shows the sector has seen boom-bust cycles before and contributed to financial stability challenges in the UK and abroad.
Continue reading “Who owns the buildings where Britain shops, works – and stores its data?”Tuli Saha and Alexandra Varadi
High levels of household indebtedness can amplify negative economic shocks, if highly indebted mortgagors make larger cuts to spending in response to them or are more vulnerable to defaulting on mortgage payments adding to bank losses. These are tail risks which can pose significant financial instability. In this post, we present quantitative evidence on these risks using a local projection model. We find that when the share of highly indebted households increases, aggregate consumption drops more sharply and mortgage arrears increase more in response to interest rate shocks. Our work highlights the importance of managing risky lending through macro and microprudential policy. And it highlights how debt burdens can interact with the monetary transmission mechanism.
Continue reading “The debt trigger: how household debt can amplify the effect of rising rates”David Rule
Digital currencies and stablecoins have increased interest in how new forms of money are adopted. Looking to three episodes from the 1690s to the First World War, this post considers how paper currency replaced coin in Britain, an historical example of adoption of new money. The underlying drivers were not technological changes but wars, leading to actual or feared shortages of coin, and a need to take specie out of internal circulation in order to meet overseas outflows. The public authorities took the initiative and created trust successfully in the new money. This is the first of a series of planned posts by Bank staff on past payment innovations.
Continue reading “War and payment innovation: the adoption of paper currency in Britain”Rhiannon Sowerbutts
The Bank of England Agenda for Research (BEAR) sets the key areas for new research at the Bank over the coming years. This post is an example of issues considered under the Financial System Theme which focuses on the shifting landscape and new risks confronting financial policymakers.
Institutions matter. And in the world of economics, few institutions are as prized as independent central banks. Monetary policy independence, many argue, allows central banks to look through electoral cycles to prioritise long-run price stability. But what about price stability’s younger, less glamorous cousin – financial stability? In a recent paper, we develop a measure of regulatory and supervisory independence (or the lack of it) and examine what are the implications for financial stability. Our findings underline the critical importance of robust, independent regulatory frameworks to safeguard financial systems and show that just as with monetary policy – independence matters for regulation and supervision too.
Continue reading “Regulatory independence and financial stability”Mohammed Gharbawi
Rapid advances in artificial intelligence (AI) have fuelled a lively debate on the feasibility and proximity of artificial general intelligence (AGI). While some experts dismiss the concept of AGI as highly speculative, viewing it primarily through the lens of science fiction (Hanna and Bender (2025)), others assert that its development is not merely plausible but imminent (Kurzweil (2005); (2024)). For financial institutions and regulators, this dialogue is more than theoretical: AGI has the potential to redefine decision-making, risk management, and market dynamics. However, despite the wide range of views, most discussions of AGI implicitly assume that its emergence will be as a singular, centralised, and identifiable entity, an assumption this paper critically examines and seeks to challenge.
Continue reading “The gathering swarm: emergent AGI and the rise of distributed intelligence”Philippe Bracke, Matt Everitt, Martina Fazio and Alexandra Varadi
The Bank of England Agenda for Research (BEAR) sets the key areas for new research at the Bank over the coming years. This post is an example of issues considered under the Macroeconomic Environment Theme which focuses on the changing inflation dynamics and unfolding structural change faced by monetary policy makers.
How do mortgagors adjust spending, savings and debt during monetary tightening? In a recent paper, we explore this question using a novel data set on household transactions and mortgage records. About 30% of households used mortgage flexibility when facing higher borrowing costs since late 2021, as their fixed-rate contracts ended. Some extended repayment periods to lower monthly payments, while others increased borrowing by extracting housing equity – leveraging nominal price gains since the pandemic – to sustain spending and reduce unsecured debt. Those unable or unwilling to use mortgage flexibility, cut spending significantly. We thus document the dual role of mortgage flexibility at refinancing: it helps smooth consumption aiding financial resilience; but it may also dampen monetary policy transmission for some households.
Continue reading “When mortgage flexibility meets monetary policy tightening: heterogeneous impacts on spending and debt”Julia Giese and Jacqueline Koay
We live in an era of rapid change, complexity and uncertainty. Over recent years, severe global shocks have been frequent, with profound implications for our economy and financial system. Yet such shocks are impossible to forecast with any precision as they are not extrapolations of past relationships. Our economy and financial system are subject to longer-running trends such as technological advances, demographics, geopolitical shifts and climate change which can be blown off course or altered in unexpected ways. Where forecasts are bound to fail, strategic foresight tools can help as they are a means for practitioners to understand the dynamics of change (and how this could impact the economy and financial stability) by imagining different futures and telling stories around how trends might interact to give rise to unforeseen shocks.
Continue reading “Once upon a time in the future: strategic foresight in central banks”Jamie Waddell and Danny Walker
Would expanding mortgage supply lead to increased home ownership? Given that 90% of young home owners have a mortgage, it’s tempting to assume the answer is yes. But our analysis suggests that assumption is not necessarily true. We show that increases in mortgage supply have historically had no discernible effect on the home ownership rate and instead tend to push up on house prices, which makes it harder for first-time buyers (FTBs) to afford their first home. They also tend to divert lending towards home-movers and there is some evidence that they increase rents too.
Continue reading “More mortgage lending might push home ownership further out of reach”Miruna-Daniela Ivan
The widespread practice of financial institution to re-use securities received as collateral plays a key role in the repurchase agreement (repo) market functioning. By increasing the availability of securities which can be used as collateral, collateral re-use lowers funding costs under normal market conditions, allowing collateral to flow to where it is most needed. But this activity may amplify the risk of delivery failures and increase volatility in repo rates during periods of market stress. This article explores the level of collateral re-use in the gilt repo market, applying algorithms from academic literature to the Bank’s Sterling Money Market Data, and provides supporting evidence of collateral re-use procyclicality, and its positive relation to repo rates volatility.
Continue reading “Collateral re-use: unveiling the risk of delivery failures and higher volatility in the repo market”