You are here: Home - News -

Highly indebted households increase after banks loosen lending – Bank of England

  • 27/06/2018
  • 0
Highly indebted households increase after banks loosen lending  – Bank of England
The number of highly indebted homes has edged up in the past couple of years, as lenders loosen underwriting standards, according to the Bank of England’s Financial Policy Committee (FPC).


Mortgage debt in Britain stands at £1.4trn, making up 75% of total UK household debt at the end of 2017, the FPC said it in its financial stability report, which analyses risks to the UK economy.

Bank risk appetites for mortgage lending has increased in recent years, with higher loan to income (LTI) multiples and the difference in price between higher and lower loan to value (LTV) mortgages falling, the FPC said.

However, tighter regulation has stopped a significant increase in highly indebted households

Rules put in place since the financial crisis mean that banks can only have 15% of new lending at LTI of 4.5% and above.

And borrowers must still be able to afford their mortgages if, at any point over the first five years of the loan, their mortgage rate were to be three percentage points higher than the reversion rate.

Lenders have “probably acted to support mortgage lending” from headwinds to the market like subdued consumer confidence by relaxing criteria, the FPC said.

Rising prices


And there have been signs of lenders raising prices in response to the increased costs of funding mortgages.

The share of households with mortgage debt-servicing ratio (DSR) at or above 40%, the point when households become highly sensitive to changes in interest rates, has increased to 1.3%, from its recent low of 0.9% in 2015.

Overall the FPC judged that, apart from Brexit risks, domestic threats to financial stability remain “standard”.

At the same time, global risks have increased and include Italian borrowing and vulnerabilities in the euro.

The FPC also flagged debt levels in China and global trade tensions as a concern.

There are 0 Comment(s)

Comments are closed.

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.


Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.


Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.


Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
Purplebricks to appeal ‘unfair’ advert ruling

Hybrid estate agency Purplebricks has hit out at an “unprecedented and unfair” ruling by the Advertising Standards Agency (ASA) against...