Tighter Mortgage Credit Could Raise Rents
A Bank of England working paper using Ireland as a case study finds lending limits cut house prices but push up rental costs.
Updated on Nov. 8, 2026 in Apartments
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Bank of England researchers published Staff Working Paper No. 1,213 on Friday, finding that tighter mortgage credit lowers house prices but raises rents. The paper uses Ireland's 2015 mortgage lending rules as its case study.
Why it matters
The findings suggest that policies aimed at easing home purchases can shift costs onto renters, since buyers stay in the rental market longer and landlords must supply more homes. The paper is research and does not represent Bank of England policy.
The model estimates house prices fall 0.9% on impact after Ireland's 2015 rules, while rents peak 4.5% higher seven years later and settle 2.6% higher in the long run. Whether the same pattern holds in other housing markets with different lending rules is not addressed.
The players
Bank of England
The central bank of the United Kingdom, which publishes staff research on economic and financial questions through its working paper series.
The details
Authored by Juan Castellanos, Andrew Hannon, and Gonzalo Paz-Pardo, the paper examines Irish rules introduced in 2015 that capped loan-to-value and loan-to-income ratios on new mortgages, including a 20% minimum downpayment and a 3.5 maximum mortgage debt ratio. The model shows prices and rents are set through interactions among renters, homeowners, and landlords with different ages, incomes, and wealth.
Timeline
2015: Irish mortgage lending rules limiting loan ratios take effect.
Seven years after the reform: Rents peak at 4.5% higher.
Friday, November 6, 2026: Bank of England publishes the working paper.
Market Dynamics
Ireland's 2015 loan-ratio limits, including a 20% minimum downpayment and a 3.5 maximum mortgage debt ratio, serve as the empirical base for the paper's model. The findings add evidence that lending restrictions shift housing costs between owners and renters rather than simply lowering total housing costs.
Renters in markets with tightened mortgage lending may face higher rents over time as more buyers stay in the rental market longer. Prospective tenants may find it useful to budget for gradual rent increases in areas where lending rules have recently changed.
The takeaway
Lending restrictions that make buying harder can push more demand into rentals, meaning renters may bear part of the cost of policies meant to ease ownership. Renters and buyers alike may benefit from tracking how credit rules affect both sale prices and rents in their local market.
Further reading
For more on how lending rules shape the rental market, explore the Apartments section.
Source note: This article includes information reported by ABC Money.
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