Sharp drop in “concern” about debt

A survey for the Bank of England reports a fall in the number of UK households concerned about their level of debt.

The report shows that in 2013, 39% of households were worried about debt, compared with 46% last year.

This prompted the Bank to warn about the potential impact of future interest rate rises 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 also showed that the average outstanding mortgage was about £87,000 and average pre-tax monthly income was £2,701, up slightly from £2,631 a year ago.