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Most Britons are able to cope with their current debt repayments, research by the Bank of England has suggested.
A survey of 2,000 people by the Bank found that "overall, household debt remains affordable". Low interest rates, a healthy jobs market and high house prices mean few people are having problems, it said.
But the Bank remains concerned about the long-term risks posed by personal debt - which is rising at 15% a year - if economic conditions worsen. The amount of money owed by UK consumers broke through the symbolic £1 trillion level in July.
UK household debt is rising at a faster rate than in the US and most major European countries.
Equity withdrawal
Most debt is owed by homeowners, but relatively few are having problems at present, the Bank of England said.
SURVEY FINDINGS
40% of outstanding household debt is owed by those spending more than a quarter of their gross income on servicing debts
Average debt owed by households with mortgages is £63,484
Average debt owed by households with secured and unsecured debt is £79,102
Poorer households have the highest level of debt in relation to their income
36% of households with unsecured debt hold some that is interest free, through "zero-interest" deals
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According to the survey only 4% of homeowners reported mortgage difficulties and only 5% said that their unsecured debt, such as loans and credit card payments, were a "heavy burden". In recent years, increasing numbers of homeowners have taken advantage of rising house prices and low interest rates to remortgage and consolidate their debts. The Bank said that this had effectively got some homeowners off the hook.
"Homeowners who might otherwise have experience debt problems have probably been able to take advantage of the equity in their home and interest free borrowing to ease debt problems," it said.
According to the survey 11% of mortgage holders had taken out an additional mortgage in the previous twelve months, worth on average £20,000.
Rental worry
In contrast, those living in rented accommodation were more likely to have debt problems, the Bank said. One in 10 surveyed admitted they had difficulty meeting housing costs.
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By the standards of the past decade relatively few households are currently close to a stressed position Bank of England |
And almost half of those renting said unsecured debt was a burden compared with only one-third of homeowners. "This may be partly because they do not have the safety valve of housing equity to help them relieve short-term financial pressures," the Bank said. The bank acknowledged that some individuals were facing difficulties repaying debts, but concluded that there was little cause for concern at present.
"Although circumstances can change suddenly, by the standards of the past decade relatively few households are currently close to a stressed position," it said.
Longer-term shock
The rapid growth of personal debt in recent years and how people can repay it is a growing issue of debate for the Bank of England. It is concerned about the effect of personal debt on the long-term financial stability of the UK. In its most recent Financial Stability Review, published this December, it warned that personal debt could pose a significant long-term risk - if economic conditions change.
"If the macroeconomic outlook were to become significantly weaker, credit risks might increase, particularly on unsecured debt," it warned.
Story from BBC NEWS: