The Financial Position of British Households : Evidence from the 2018 NMG Consulting Survey

Households' expectations for their future income and spending growth held up in the latest survey (conducted between 5 and 26 September) with expectations for the wider economy remaining subdued.The size of the tail of highly indebted households has fallen slightly over the past year — somewhat reversing the gradual deterioration observed since its post-crisis trough. By contrast, subjective self-reported metrics of household vulnerability showed a small increase.The 25 basis point increase in Bank Rate to 0.75%, announced in August 2018, has already been passed through to higher interest rates for the majority of mortgagors on floating rates. The impact on borrower resilience and the availability of credit appears limited.One way higher interest rates affect households is through the higher interest they pay (receive) on the debt (assets) they hold. New estimates suggest a 1 percentage point increase in Bank Rate could reduce consumption by 0.2% through this channel, a smaller effect than previously estimated