This completes our network of 12 regional agencies across the UK - with the purpose of keeping ourselves more closely informed of regional economic developments. Previously Neil Kemsley covered Northern Ireland from our Agency in Liverpool and is here to make his farewell - and I am grateful to him for all that he did in reporting on developments here. But Nigel Falls - one of our most experienced regional Agents - is now established here in Belfast itself. He is also with us today. I very much hope that many of you will establish regular contact with him so that he can inform our Monetary Policy Committee each month of the particular problems that exist in Northern Ireland, so that we can take them into account in our monetary policy process. His reports will complement those which Roy Bailie, our Non-Executive Director here in Ireland, gives regularly to our Court of Directors. In our monetary policy role the Bank operates essentially on the demand side of the economy - aiming to keep aggregate demand in line with the supply-side capacity of the economy to meet that demand. But we can also contribute directly on the supply side, by helping to ensure that the financial system properly supports the needs of the wider economy.
Mortgage and real estate markets remain the biggest source of risk. I would like to make two observations in this connection. First, the imbalances on the mortgage and real estate markets persist. Both mortgage lending and prices for single-family homes and privately owned apartments have continued to rise at a moderate rate over recent months. And while prices for residential investment property have not increased any further, the risk of a price correction in this segment is particularly high. The renewed increase in vacancy rates indicates that the robust activity in rental apartment construction may have led to oversupply, exerting downward pressure on rental income and, in turn, on the prices of these properties. At the same time, initial yields on residential investment property, in other words the ratio of rental returns to transaction prices, are at historically low levels. In the event of an interest rate rise, initial yields on investment properties will also have to increase upon a change of ownership. This would place additional pressure on prices. Second, the risk appetite of domestically focused banks remains high. This is partly due to the fact that interest rate margins of these banks fell further in the first half of 2018. As long as this pressure on margins persists, incentives for domestically focused banks to increase risktaking will remain substantial.