This is likely to be particularly true when there is increased uncertainty about unemployment.15  The literature suggests that both channels can be important. For example, Danish research finds evidence in favour of over-consumption in Denmark over 2003 to 2009.16 This captures consumption financed by mortgage equity withdrawal or second mortgages, although the results may in part be driven by consumer credit, as the study does not distinguish between mortgage debt and consumer credit. The authors of the study think of the subsequent cuts in consumption as ‘spending normalisation’. In the UK, however, research shows that a credit availability channel is best able to explain the historical movement between leverage and consumption.17 And studies in the US point to a range of channels, including credit availability and liquid assets.18  This variation in findings is not surprising. One would expect the channels to vary over time and across countries. But what does it mean for policy? 13  For example Andersen et al (2016), Kovacs et al (2018), Dynan and Edelberg (2013) and Fagereng and Halvorsen (2016). For example Bridges et al (2017) and Jorda et al (2016). For example, in Japan, Nakajima (2018) finds that precautionary saving – in particular due to concerns about potential unemployment and old age – played a significant role in explaining consumption cuts by highly indebted households. 16 Andersen et al (2016). 17 Kovacs et al (2018). 18 Dynan and Edelberger (2013) and Baker (2018).
The Bank has excellent access to both:  -  Many years ago, we set up our own survey of households in the UK – the NMG survey – to ask the questions that are most important to us. Every six months, a sample of six thousand households is asked questions about their financial position and outlook that help inform decisions by the FPC (and other Bank policy committees).19  -  The Bank does receive comprehensive data about the flow of new mortgages.20 And Bank staff have developed a model to use this – and information about how incomes are changing in the UK – to project the distribution of indebtedness relative to incomes in the stock of mortgages. A working paper on that modelling is being released today.21  We can use the surveys and models to estimate the distribution of current loan to income characteristics of the households with mortgages and compare that to the distribution in 2014. Surveys and model outputs involve uncertainty, for different reasons. But it is reassuring that in this exercise they give us broadly consistent results. 19  The survey is weighted to be representative of the age, gender, region, housing tenure and employment status distributions of Great Britain. 20 The Bank does also receive a snapshot of the stock but some variables crucial for risk assessment are not captured in this. 21 Levina et al (2019).