The Financial Position of British Households: Evidence from the 2017 NMG Consulting Survey

12 Pages Posted: 4 Jan 2018

See all articles by Philippe Bracke

Philippe Bracke

Bank of England - Structural Economic Analysis Division; London School of Economics & Political Science (LSE)

Hasdeep Sethi

Bank of England

Emma Rockall

Bank of England

Catherine Shaw

Bank of England

Date Written: December 15, 2017

Abstract

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.

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.

Suggested Citation

Bracke, Philippe and Sethi, Hasdeep and Rockall, Emma and Shaw, Catherine, The Financial Position of British Households: Evidence from the 2017 NMG Consulting Survey (December 15, 2017). Bank of England Quarterly Bulletin 2017 Q4. Available at SSRN: https://ssrn.com/abstract=3095932

Philippe Bracke (Contact Author)

Bank of England - Structural Economic Analysis Division ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Hasdeep Sethi

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Emma Rockall

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Catherine Shaw

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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