Matteo Benetton, Alessandro Gavazza, Paolo Surico, 09 September 2021

In the aftermath of the 2007–09 financial crisis, central banks have sought to stimulate the economy through new policies aimed at revamping credit and housing markets. This column examines the effects of the Bank of England’s Funding for Lending Scheme, which offers cheap medium-term loans to UK lenders. Mortgage lenders actively price-discriminate across borrowers using two-part tariffs which split the origination fee from the interest rate. This increased after the introduction of the scheme, implying a stronger transmission of monetary policy to credit markets and the real economy.

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