The House of Commons Library has just published it’s latest data, which can be seen here.

The data highlights important trends in household finances across the UK, focusing on household debt, mortgage interest rates, and individual insolvencies:

Household Debt as a Percentage of Disposable Income

  • Trend: Household debt as a percentage of disposable income has been declining since its peak of 156.4% in Q3 2008. By Q3 2024, it stood at 120.0%, continuing a long-term downward trend since 2007.
  • Impact: The decline indicates improved financial health for households, potentially due to deleveraging and stricter lending regulations. However, the slowing pace of debt growth since 2022 suggests that economic pressures, such as rising costs or interest rates, may have tempered borrowing.

Current Average Mortgage Interest Rates

  • Standard Variable Rate (SVR): At 7.50% in December 2024, SVRs have been rising steadily since 2022 but saw a slight year-on-year decrease of 0.42 percentage points.
  • 2-Year Fixed Rate: This rate was 4.60% in December 2024, down 0.43 percentage points compared to the previous year. After a sharp rise from 2022, rates have fluctuated but have been falling in recent quarters.
  • Implications: While falling fixed rates may provide some relief for borrowers, the high SVR remains a concern, particularly for those unable to remortgage. Rising interest rates in recent years have likely increased mortgage repayment burdens.

Individual Insolvencies

  • England and Wales: Q3 2024 saw 31,276 insolvencies, a 27.4% increase compared to Q3 2023. This rise highlights growing financial strain among individuals.
  • Scotland: Insolvencies were 2,056 in Q2 2024, showing a slight annual decline of 2%.
  • Northern Ireland: There were 397 insolvencies in Q3 2024, marking a 6% year-on-year increase.
  • Analysis: The increase in insolvencies in England, Wales, and Northern Ireland points to escalating economic pressures, possibly linked to higher living costs and debt servicing challenges.

Summary

The overall picture reflects mixed financial pressures:

  • Household debt levels relative to income are falling, suggesting improved financial sustainability.
  • Mortgage rate fluctuations and a high SVR pose challenges for borrowers.
  • Rising insolvencies indicate that many households are struggling, despite the decline in debt-to-income ratios.

The data underscores the need for policies supporting affordable housing, responsible lending, and financial relief for vulnerable households.