Households may struggle if interest rates hit 2% - Bank
Last week, the Bank kept the base rate on hold at 0.5%, but left the door open for a potential rise in May.
Minutes of the latest Monetary Policy Committee (MPC) meeting showed that two of the nine members voted to raise rates to 0.75% amid concerns over inflation as wage growth has started to pick up.
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Hide AdA record of the Financial Policy Committee (FPC) meeting which took place on March 12 was published by the Bank on Tuesday.
It said the total debt service ratio - defined as interest payments plus mortgage repayments as a share of household disposable income - was below the pre-crisis average in the third quarter of 2017.
The share of households with a debt ratio above which they may be more likely to experience repayment difficulties also remains relatively small, at 1.4% in the third quarter of 2017.
The average share of households in this situation prior to the crisis was 1.9%.
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Hide AdThe document said: “Mortgage interest rates would need to increase by around 150 basis points with no change in household income for this ratio to return to its pre-crisis average.”
The report also cautioned that it was important not to draw too much comfort from comparisons to the pre-crisis era “given the scale of vulnerabilities that had built up then”.
The document said although the share of lending at very high loan-to-value ratios of over 95% has remained significantly below pre-crisis levels, the share of lending at LTV ratios just below that has recovered from its crisis troughs.
But it said there was little evidence of easier credit conditions driving a stronger uptake in mortgage borrowing by households in aggregate.
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Hide AdA pick-up in owner-occupier mortgage lending has been offset by the softness in demand in the buy-to-let market, the document said.
The FPC meets to identify risks to financial stability and agree policy actions aimed at safeguarding the resilience of the financial system.