Bank of England reports sharp drop in debt 'concern'

Sterling The average outstanding mortgage is £87,000 according to the BoE

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A survey for the the Bank of England says there has been a sharp drop in the number of households concerned about their debts.

In 2013, 39% of households were worried about debt, compared with 46% last year, the report says.

But the Bank warned about the potential impact of future rises in interest rates on borrowers.

The number of people worried about the affordability of their debts was unchanged from 2012.

"While debt servicing costs were also broadly unchanged, a significant increase in interest rates at current incomes may increase financial pressure on households with a mortgage," the report said.

Among households with mortgages, 8% are paying out 35% or more of their incomes on servicing those loans.

But if interest rates were to rise 2.5 percentage points, the proportion of people supporting that repayment burden would double to 16% - assuming no rise in incomes.

The survey showed that the average outstanding mortgage was reported to be about £87,000 and average pre-tax monthly income was £2,701, up slightly from £2,631 a year ago.

Meanwhile, the Bank has been looking into the effects that rising interest rates would have on households.

If interest rates were to rise from the current level of 0.5% to a more normal 3%, without any increase in household incomes, it estimated that holders of 50% of UK mortgages would have to either reduce their spending or find more work.


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  • rate this

    Comment number 197.


    ... Why did I stint myself? Why didn't I just spend, spend, spend like everybody else...

    Because you don't live your life dependent upon the whims of government benefits policy and worried about every bill that drops through the door. I imagine you're happy with that :-)

  • rate this

    Comment number 196.

    Well, well Unemployment down. Inflation down. Record number attending University. Concern over Debt down. The Economy on the up and up.
    Things just get better and better under the Coalition Government.
    And the clocks are just striking thirteen!

  • rate this

    Comment number 195.

    Oh yes the Bank of England. That private institution that prints cash and then charges the gov't interest for using it and whose shareholders are mostly secret private individuals.

    Don't believe a word they say

  • rate this

    Comment number 194.

    "QE = £ devaluation = more debt = less freedom
    We are witnessing is a gradual, occasionally rapid decline.
    We have no raw materials, a mediocre education standard and little in the form of skills to sell to other nations.
    We now compete with emerging nations and can anticipate a similar standard of living."
    But why is no one asking why WE are NOT INVESTING in UK YOUTH ?

  • rate this

    Comment number 193.

    I can remember as a kid this new thing coming out called "American Express" - what was it? a credit card - My parents we'ren't impressed and neither was I. in my whole life i have never had a car loan, store card, bank loan - and only had a mortgage for 8 years - then fully paid. Never in my wildest dreams did I imagine a future where debt would be rewarded and saving severly punished.

  • rate this

    Comment number 192.

    It goes round and round, workers debt pays for the luxurious lifestyle of capitalists, keep voting for the governments that endorse this ideology and it will continue ad infinitum!

  • rate this

    Comment number 191.

    I have been lucky enough to live my entire life debt-free (through living a very modest life-style) but now I wonder why I bothered. Why did I stint myself? Why didn't I just spend, spend, spend like everybody else and let the government worry about the consequences?

  • rate this

    Comment number 190.

    @ 2. blagshaw

    Clearly you are both living beyond your means whilst neither of you are undertaking your responsibility as parents. Having children is not the responsibility of others; it is yours!

  • rate this

    Comment number 189.

    Increasing interest rates are generally used to prevent inflation by removing excess cash from the economy as a result of all us greedy workers asking for pay rises.

    Fortunately the overpaid top 1% - those who's pay IS increasing - don't spend it but put it offshore to increase inflation in Switzerland etc.

    No immediate need for interest rate increase then. Hooray!

  • rate this

    Comment number 188.

    Where do they get these 'statistics' on the general public feelings? I've lived in the UK for 30 years and never been asked or known of anybody who has been asked even once!

  • rate this

    Comment number 187.

    If your mortgages are all variable rate & the percent changes after a fixed time and you can control a rise in payment by paying an additional amount on principal every month. Did this when variable mtgs were at 9% with cap at 16%. I did some spreadsheet math & added $100 to my first payment - paid it off in 10 years - so cost 2/3 of todays value rather than 3 times todays value.

  • rate this

    Comment number 186.

    Ben please tell us where you're from - at least give us a chance to return the favour?

  • rate this

    Comment number 185.

    Good to see so many on the Left warning of the perils of borrowing too much for things people can't afford. It's a shame that they don't apply this to the public finances. Of course Gordon and his boys made sure that we didn't have boom and bust. Why didn't we keep them in power?

  • rate this

    Comment number 184.

    Interest rates will go up gradually to fund the banking crisis.

  • rate this

    Comment number 183.

    Why are you asking for rates to rise?

    People have already been pushed to the edge with this governments austerity measures, the banking fiasco and frozen wages.

    Raising interest rates will push borrowers (who borrowed sensibly a decade ago, but now find it harder to make ends meet) over the edge.

    Think before you raise interest rates and beware what you ask for.

    There are other ways.

  • rate this

    Comment number 182.

    Here we go again.
    Yet another debt fuelled bubble is coming.
    Our politicians and the BOE are making a huge mistake by not increasing interest rates now.
    We all make mistakes, but to make the same mistake over and over again, is indefensible.
    Mr Carney and the monetary committee, are behind the economic cycle, and are failing us all.
    We will all suffer when the economy overheats and crashes again.

  • rate this

    Comment number 181.

    The problem is the that the houses that many mortgages are based on are simply not worth the value people paid for them.

    If no one can afford a mortgage or the deposits are too high then its too expensive to purchase and above the market value.

    However as many have pointed out its clear the banks and govt are determined to keep prices high via help to buy schemes, worsening the problem!!

  • rate this

    Comment number 180.

    And we're surprised at this why? Whatever the trotsky trolls and socialist saboteurs say, the economy is recovering after Labour's decade plus of destruction. I guess the problem with these naysayers is that they wouldn't recognise an economic success if it slapped them in the face since economic failure is their success.

  • rate this

    Comment number 179.

    Debtors have twigged on that there are no real consequences for defaulting on their debts. Credit card providers, banks, money unions, pay day lenders et- al can't do much other than send letters threatening legal action. Serial debtors know the Courts won't start putting heads of families in jail because they're already full. Being permanently in debt is smarter than trying to live on savings.

  • rate this

    Comment number 178.

    It seems that we're backed into quite a tight corner re interest rates. Quite a lot of people would suffer if the rate increased. So I wonder just how true it is that people are not concerned about debt, or whether they're basing this confidence on interest rates staying low for a very long time.


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