Household debt ‘may not be such a problem’

Arguments that the UK economy requires a major rebuilding of household finances to help it recover may be excessive, it has been suggested.

Economist Spencer Dale, who is a member of the Bank of England’s Monetary Policy Committee, said in a speech that the lower price of homes may cause wealth to fall, but also provides a wealth rep benefit through making housing more affordable.

Thus, he argued, “the pressure on households to repair their balance sheets might be exaggerated”, also suggesting that the level of “human capital” has not been diminished much by the downturn.

Some may wish to take advantage of this greater affordability by applying for a mortgage before prices rise again too much.

Mortgage lending has climbed recently, according to various statistics.

This week the British Bankers’ Association revealed that the total number of home loans agreed in August was up 81 per cent on the same month in 2008.

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