Few Households Have Debt Problems - What Nonsense!

Only a few households are having problems repaying their debts and these tend to be low income people with unsecured borrowing, according to research published by the Bank of England on Monday.

In its Quarterly Bulletin, the central bank said households that devoted a large part of their income to servicing debt typically had low incomes and therefore a disproportionately small share of consumption and the debt stock.

"So if a fraction of these households cut back on spending or defaulted on their debts, the impact on monetary and financial stability would be smaller than if their spending and debts matched those of the average UK household," the article said.

The article, which uses a survey of just under 2,000 people, may lend justification to policymakers' views that the recent jump in consumer bankruptcies to record levels is a social problem rather than one that could affect financial stability.

Many commentators have expressed concerns that very low interest rates had encouraged a borrowing binge in Britain -- consumer debt tops a trillion pounds -- which was now hurting consumers both in the form of bankruptcies and a retail slowdown.

The BoE survey indicated that most consumer debt was secured on property and very few people reported problems servicing that debt.

"The survey indicated that very few people viewed bankruptcy as a solution to their debt problems," the article said.


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