UK family debt won't recover till 2019
Filed under: Debt
And it could take till 2019 before such households get back on their feet.
Mortgage Advice & Info
Need to know: Savings
Call them MEWers - people who over-indulged on mortgage equity withdrawal. More worryingly, many households may only be kept going on the back of low interest rates, the NIESR says. If banks continue to hike rates - as some are doing now, regardless of the current Bank of England base rate - many will be hugely exposed.
Cut the MEW-ing
Especially when the economic recovery eventually does arrive. That's when the Bank of England would face pressure to hike interest rates to a more sustainable long-term rate. Adding to the misery, the NIESR predicts that house prices will also likely slump by an average -1.5% annually - and this slump could last five years.
It's not all dismal news. From the start of next year the UK can expect more robust growth, "with a sustained period of above-potential growth from 2014, which is necessary to reduce the output and unemployment gaps," the think-tank said. It also forecasts that inflation will fall below the two per cent target by the end of this year.
Borrowers' bear blame
But the NIESR doom-mongering comes on the back of one senior Cabinet minister exhorting homeowners who splashed out on new cars, holidays and home improvements on the back of house price climbs to knuckle down and take the debt hit.
"People say to me, 'It was the banks'. I say, 'hang on, the banks had to lend to someone'". Philip Hammond's comments were reported by the Telegraph. He added: "We allowed our expectations to run away with us. We started living a lifestyle both in private consumption and in public consumption that we could not afford."