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BoE says debt repayment 'unproblematic'
13/03/2006 17:35:00
Repaying debts is not a significant problem for the majority of households, new research from the Bank of England suggests.
Published in the Bank's Quarterly Bulletin, figures show that more than 75 per cent of households surveyed spent less than 25 per cent of their income servicing debts, Reuters reports.
Of the 2,000 people surveyed in September 2005, those that were struggling to repay debts were most likely to be low-income households with unsecured borrowing, equalling a disproportionately small share on consumption and debt stock.
"If a fraction of these households cut back on spending or defaulted on their debts, the impact on monetary and financial stability would be smaller than if their spending and debts matched those of the average UK household," the bulletin concluded.
The findings give weight to some policymakers' argument that the recent rise in personal bankruptcies does not pose a risk to financial stability but is rather a social problem.
Commentators have increasingly questioned whether consumer borrowing has become excessive, encouraged by low interest rates. Personal debt now exceeds a trillion pounds, with the effects becoming apparent in the consumer slowdown and surge in bankruptcies.
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