In an interview on BBC radio, the deputy governor of the Bank of England, Jon Cunliffe, said he was concerned about high debt levels in some families in the UK.
He warned that some households had levels of debt that were worrying and which could see them plunged into crisis if the general economy turns sour.
He said, “Household debt is quite high by historical standards but households have worked hard to put those debt levels down. But within that there are areas that you do worry about.”
“You worry about households that have high debt and could be badly affected in a recession.”
About 75% of household debt in the UK, which now accounts for £1.8 trillion, is mortgage debt. If interest rates rise then this debt will become more expensive to repay. The remaining debt is mainly consumer credit.
The Bank’s latest financial stability report shows how household debt is creeping up again, when compared to the nation’s income.
Policymakers have said that we are not at 2008 levels yet, but seem concerned about the direction of travel.
The Bank of England’s Regional Agents report also shows that Britain’s consumers are cutting back, particularly when it comes to big-ticket items.
The report stated, “Growth in demand for consumer goods had not recovered sufficiently to make up for sales lost due to the adverse weather in Q1, however, and there was ongoing weak demand for new cars, white goods and homewares.”
“Contacts attributed more cautious consumer sentiment to squeezed real incomes, higher pensions auto‑enrolment contributions and political uncertainty. Third-sector contacts suggested that delays in benefit payments and benefits sanctions were increasing the pressure on low-income households.”
A further worry is that this could mean that some consumer-focused firms are planning to axe jobs.