More "We might do something, maybe" from the BOE

Graham_Devon

Bank of England policymakers will act "sooner rather than later" to curb credit growth, if the recent rise in household debt starts to gather pace, a top official has said.

Sir Jon Cunliffe, the Bank's deputy governor for financial stability, said consumer debt remained "large by historic standards”, leaving the UK economy "vulnerable to shocks".

He said the Financial Policy Committee (FPC), which is in charge of maintaining financial stability, would consider taking action if credit started to grow faster than the economy.

"Given the vulnerability that already exists and the powerful drivers in the UK, particularly the housing market, if credit began again to grow faster than GDP, I would want to think about action to manage the financial stability risks sooner rather than later," he told an audience in London.

Consumer credit is increasing at record pace (or was last year) so not entirely sure how much faster it needs to increase before they do something. It's also at record highs, well passed the level in 2007.

They also seem to be warning that they might do something more with BTL.

ir Jon also said Britain's buy-to-let market warranted closer monitoring because landlords were more sensitive to booms and busts in the housing market.

“I don’t know how that sector of the market, the buy-to-let sector, will react in terms of market stress,” he said. “That could make a crash in house prices, if you get into all these balance sheet problems with households.”

So seems we've got some more words.

Appears to me we could be at the point that the horse has bolted again though. Only hindsight will tell I guess.

http://www.telegraph.co.uk/finance/bank-of-england/12148080/Bank-of-England-poised-to-act-if-household-debt-spirals.html

mwpt

Consumer credit and the housing market IS the UK economy.

michaels

Balance of payments not looking so healthy either.

But how do you control credit without rasing interest rates? It smacks of getting involved in areas where the state shouldn't interfere in the affairs of consenting adults....

purch

I would put my money on "later rather than sooner"

Central Banks are not known for being proactive.

Graham_Devon

michaels wrote: »

Balance of payments not looking so healthy either.

But how do you control credit without rasing interest rates? It smacks of getting involved in areas where the state shouldn't interfere in the affairs of consenting adults....

What's slightly interesting is that they have been, for the past few years actively trying to push this credit. FFL for example is a mere example. You've got HTB to allow people to take on loans they otherwise couldn't get. Consumer credit appears to have been loosened quite dramatically....you only need to look at the push and lifting of limits on credit cards to note this.

And then there was all that focus on getting business to borrow around 2-3 years ago - even where business didn't want to borrow.

It appears to me this is exactly what they wanted - afterall, what was with all the programmes and schemes to push lending?

savepete

George Osborne wants to become Prime Minister. How can he get there? Loosening the strings to get the middle classes to vote for him.

Thrugelmir

michaels wrote: »

But how do you control credit without rasing interest rates?

Tackle the unsecured lending market in the same way as mortgages with MMR. Impose more regulation and discipline on the finance houses. Ban 0% transfer deals and purchase credit cards for example. Buy now pay later is the first step for many towards financial distress. As redundancy, sickness, relationship break up, etc all contribute to a fall in income. Being one pay check away from the edge is not a good culture to endorse. Not suggesting credit per se is bad. Just needs to be managed better.

Thrugelmir

Graham_Devon wrote: »

What's slightly interesting is that they have been, for the past few years actively trying to push this credit. FFL for example is a mere example. You've got HTB to allow people to take on loans they otherwise couldn't get.

Mortgages are now tightly regulated and affordability assessed. Over 97% of new mortgages are on a repayment basis. Very different world to when HBOS and Northern Rock were lending money like confetti pre 2008.

mayonnaise

There is no reason to worry about UK household debt.

http://www.ft.com/cms/s/0/761ab30c-b941-11e5-bf7e-8a339b6f2164.html#axzz3zhD0Rk00

mwpt

mayonnaise wrote: »

There is no reason to worry about UK household debt.

http://www.ft.com/cms/s/0/761ab30c-b941-11e5-bf7e-8a339b6f2164.html#axzz3zhD0Rk00

I love how we can just quote a blurb piece by some blogger from a paper and this is evidence. The article is nice and all, but who really knows anything...

This bit for instance had me chuckling.

Instead of appealing to myths, the question of debt should begin and end with the health of household balance sheets. Official figures show that after deducting debt, net household assets stood at 7.67 times income in 2014, a stronger financial position than at any point in almost 100 years. It is no wonder that the savings ratio is falling. British households can afford it.

Yup, because the assets have increased so much because of the credit boom.

Thrugelmir

mwpt wrote: »

Yup, because the assets have increased so much because of the credit boom.

Mr Brown was a financial journalist and what a mess he made of the UK economy. :cool: