The Monetary Policy Committee, the Bank of England committee that sets the interest rate at which the Bank lends to commercial banks, held Bank Rate at 3.75% on 30 July 20261. The Bank's July Financial Stability Report, its twice-yearly assessment of risks to the financial system, was published in the same month and reads the household sector from the lender's side of the ledger2.
That report puts mortgages in arrears of more than 2.5% of the outstanding balance at 0.9%, and consumer-credit arrears at around 1%. It records 1.6% of households, roughly one in 63, spending more than 70% of their income, after tax and essential spending, on servicing debt. Against those numbers, 30% of households told the Bank they were in financial difficulty during the first half of 20263.
The two halves of the report do not contradict each other, because they count different things. Arrears count people who have already missed payments a lender has recorded. Financial difficulty counts people who say they are struggling, most of whom keep paying, often by cutting spending or borrowing elsewhere first. A survey answer can move a year or more before a loan book does.
That gap matters for anyone using bank data as a warning system. The Bank cut banks' capital requirement by 100 basis points to 13% last December after its stress test, a judgement made about the resilience of lenders rather than about the comfort of borrowers. Strain in Britain is currently surfacing in what households say and in formal insolvency procedures, and only later, if at all, in the secured lending that regulators watch most closely.
