The financial position of British households: evidence from the 2017 NMG Consulting survey
AuthorsPhilippe Bracke, Hasdeep Sethi, Emma Rockall and Catherine Shaw
Since the financial crisis, household balance sheet positions have improved significantly. The latest survey points to a slight deterioration in household balance sheet metrics over the past year, but these measures remain some way from previous peaks. For example, the share of households with a mortgage debt-servicing ratio (DSR) above 40% of income, — a DSR often associated with a higher risk of repayment difficulties — has risen over the past year. But that share remains around a historically low level.
Changes in Bank Rate can influence household spending through a number of channels. To the extent that increases in Bank Rate feed through to retail interest rates, they affect household disposable income by raising payments on existing debts and deposits. The NMG survey provides evidence on this cash-flow effect and suggests that only around 2½% of households with a mortgage will need to take action (for instance by spending less or working more hours) following the rate increase.
The decision to leave the European Union in the June 2016 referendum is still influencing households’ economic outlook. Views on both the general economy and households’ own finances have become slightly more pessimistic over the past twelve months. Expectations about nominal income growth, however, have reverted back to pre-referendum levels.
Volume and page numbersQ4, 1-12