Bank Of England - UK Household And Corporate Debt Vulnerabilities

7th December 2024

The outlook for UK growth over the coming year is a little stronger than it was at the time of the Financial Stability Report (FPC)'s Q3 meeting.

The aggregate mortgage debt-servicing ratio is expected to continue to rise modestly, but the share of households in arrears or with high debt-servicing burdens has remained relatively low and the outlook for mortgage borrower resilience has improved in line with the domestic economic outlook.

Although quoted mortgage rates have risen in recent weeks, they remain slightly lower than at the time of the June FSR. While around a half of mortgagors are likely to experience greater borrowing costs over the next three years as they refinance onto higher rates, around one quarter of borrowers are expected to benefit from lower rates.

Risks remain among small and medium-sized enterprises and some highly leveraged corporate borrowers, including those backed by private equity. These businesses, many of which rely on market-based finance, are likely to face greater challenges from higher rates as they refinance.

These challenges would increase if investor risk appetite deteriorated, or if interest rates remain higher for longer than markets expect. Market issuance has, however, continued to be strong since the June FSR.

Source - https://www.bankofengland.co.uk/financial-stability-report/2024/november-2024