By Philippe Bracke and Hasdeep Sethi of the Bank’s Structural Economic Analysis Division, Emma Rockall of the Bank’s Monetary Assessment and Strategy Division and Catherine Shaw of the Bank’s Macro Financial Risks Division.
At its November 2017 meeting, the Bank of England’s Monetary Policy Committee (MPC) voted to increase Bank Rate for the first time since July 2007. The September 2017 NMG Consulting survey of households, whose results were shown to the MPC prior to their November policy decision, sheds light on the conditions of households’ balance sheets just before this change in monetary policy.
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 (summary chart).