Commentary – Household Debt

Between 1997 and 2008 there was a steady but significant rise of around 60% in the debt of UK Households and NPISHs relative to GDP. Following the financial crisis this trend was reversed, although in 2015 the percentage was still well above its 2000 value.

As part of the same phenomenon the UK savings ratio – the ratio of savings to disposable income – tended to decline from a high of around 14% in 1997, reaching a low point of around 4.5% in 2008. It then rose sharply until around 2011 when it started to decline towards its 2008 level.

A similar pattern in the behaviour of household debt has been observed in other countries – with the debt ratio rising until 2008 and then gently declining. Germany is a notable exception.

For the latest period for which we have data the UK percentage is at the higher end of the distribution of debt to income ratios across countries.

But ONS calculations suggest that UK Households and NPISHs Total Net Worth is over  500% of its Gross Disposable Income, giving it one of the highest ratios amongst comparable countries. Total Net Worth is Total Financial Assets and Non-Financial Assets (which are mainly houses) minus Total Liabilities.