Bank of England may act if lending speeds up: Jon Cunliffe
LONDON: The Bank of England will consider steps to safeguard financial stability if household debt grows faster than the rest of the economy, the bank policymaker in charge of financial stability said today. British household debt, measured as a share of income, has fallen substantially from its peak during the financial crisis and has now stabilised around levels last seen in 2004. Deputy Governor Jon Cunliffe said he did not want a return to the situation before the financial crisis, when credit grew twice as fast as the economy as a whole. "If credit began to grow faster than GDP, I would want to think very seriously about taking action to manage that sooner rather than later," Cunliffe said at a conference hosted by the British Property Federation. British households' gross debt peaked at 155 percent of their annual after-tax income in 2007, then fell during the financial crisis and has held at around 135 percent since 2012. A broader measure which includes business loans - credit as a share of GDP - peaked at 177 percent in 2009. It is now about 140 percent, a bit below average for an advanced economy. Cunliffe said it would take several years of borrowing growing faster than wages or the economy as a whole to take debt to dangerous levels. But measures might need time to take effect, arguing in favour of acting earlier. Any action is unlikely to take the form of raising record-low interest rates. The BoE has said higher rates would be a last resort to tackle excess bank lending; they are used to guide consumer price inflation towards its 2 percent target. Instead, the BoE's Financial Policy Committee has a wide range of powers to require banks to curb mortgage lending and limit borrowing more generally. In 2014, the central bank required lenders to heavily restrict high loan-to-value mortgages, and Tuesday's remarks suggest broader curbs could be needed if lending picks up. Despite a darkening global economic outlook, British consumer demand has been buoyed by record employment, low inflation and a moderate increase in wages.