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The anatomy of a shock to residential real estate: the role of lending

Author

Listed:
  • Moktan, Sidharth

    (London School of Economics and Political Science)

  • Guin, Benjamin

    (Bank of England)

  • Clarke, Liam

    (Bank of England)

Abstract

What is the role of lending in transmitting shocks to residential real estate? We consider this question by examining an adverse and salient shock to a segment of the property market in England and Wales. This shock, arising from a tragic event which resulted in significant loss of life, affected high-rise properties.1 Using comprehensive administrative data on all residential mortgage and property transactions, combined with property‑level rent data, we study responses in these markets. Consistent with the idea of credit being a ‘financial accelerator’, we document a decline in mortgage originations following the shock, with the sharpest contraction observed among first‑time buyers. We also highlight the role of cash buyers and lender size in dampening the overall impact of the shock. Additionally, the paper provides a conceptual framework that integrates multiple administrative data sets to understand how salient shocks, including those related to climate risks, may affect the property market. It offers valuable insights for financial policymakers on how these shocks propagate through credit and housing markets.

Suggested Citation

  • Moktan, Sidharth & Guin, Benjamin & Clarke, Liam, 2025. "The anatomy of a shock to residential real estate: the role of lending," Bank of England working papers 1111, Bank of England.
    • Handle: RePEc:boe:boeewp:1111
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2025/the-anatomy-of-a-shock-to-residential-real-estate-the-role-of-lending.pdf
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    More about this item

    Keywords

    Residential real estate; mortgage market; collateral shocks;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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