Hangover Cure: Dealing with the household debt overhang as interest rates rise

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Housing, Wealth and Debt

The UK is entering a period in which interest rates are expected to start rising again – with the first moves potentially coming later this year – having insufficiently dealt with the debt overhang. This leaves the UK economy vulnerable to even modest increases in interest rates.

Deconstructing the debt overhang will not be costless, but it is in everyone’s interests – borrowers, lenders, government and taxpayers alike – to adopt a pro-active measured approach rather than simply allowing it to collapse. We favour an orderly and managed dismantling of the debt overhang. This report sets out a series of recommendations for lenders, borrowers and policy-makers to make that happen.

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Mortgaged Future: Modelling household debt affordability and access to re-financing as interest rates rise

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Housing, Wealth and Debt

One in ten of today’s mortgagors risk being imprisoned by borrowing deals which are likely to make their repayments unaffordable as interest rates rise over the next four years. Around 770,000 households are both at risk of being ‘mortgage prisoners’ due to a limited ability to switch to better mortgage deals and therefore insulate themselves against future rate rises, and at risk of being ‘highly geared’ where monthly mortgage repayments are eating up at least one third of their disposable income by 2018.

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Have we lost our bouncebackability?

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Public Finances and the Economy

In the light of latest OBR forecasts and the 2014 Budget, this paper considers where anticipated growth can come from. In the absence of widely-shared wage growth, can the UK economy grow above trend without a surge in credit? Or, must we resign ourselves to a period of subdued recovery?

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Closer to the edge? Debt repayments in 2018 under different household income and borrowing cost scenarios

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Housing, Wealth and Debt

Britain faces the mounting prospect of a household debt crisis as analysis from the Resolution Foundation suggests that a least a million British families, and possibly as many as 2 million, could be spending more than half their disposable income on repayments by 2018 The study uses the latest five-year growth projections from the Office … Continued

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Closer to the Edge? Prospects for household debt repayments as interest rates rise

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Housing, Wealth and Debt

The number of families in Britain with perilous levels of debt repayments could more than double to 1.2 million if interest rates rise faster than expected in the next four years and household income growth is weak and uneven. The figures suggest that the ongoing squeeze on households could leave Britain seriously exposed if interest … Continued

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On borrowed time? Dealing with household debt in an era of stagnant incomes

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Housing, Wealth and Debt

On borrowed time? examines how and why household debt grew in the pre-crisis years, before turning to study the current scale and distribution of exposure to debt across households. Finally, the report looks at the link between household debt and prospects for economic growth, setting out a range of broad policy considerations that will frame our … Continued

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