Household debt to income ratio in the UK 2000-2023

The debt to income ratio of households measures the amount owed through loans to the gross disposable income of households. The ratio indicates the national level of indebtedness of households and their ability to repay their debts. The total value of household debt (total liabilities and loans to households) has increased annually since 2000.

Debt to income ratio increased during the pandemic

From the second quarter of 2020, the debt to income ratio of households in the UK increased significantly, reaching a peak value of approximately 136 percent in the second quarter of 2021. Nevertheless, the volume of new consumer lending actually reached historically low values during that time. The main reason for could be that due to the lockdowns and restrictions implemented during the start of the COVID-19 pandemic, UK citizens decreased their spending in 2019. Meanwhile, the growth rate of mortgages in the UK kept rising in 2020 and peaked in 2021 with the highest values since 2008. Although the average household in the UK had higher debt than income, the rate of lending that is non-performing is low in the UK, slightly above one percent.

Indebtedness in Europe

For many countries in Europe, the total outstanding debt of households as a percentage of their gross disposable income is higher than 100 percent. According to the OECD, the debt of households largely consists of loans, primarily home mortgage loans, but also other types of liabilities such as consumer credit (e.g. credit card, automobile loans). A ratio above 100 percent shows that the level of debt outstanding is larger than the annual flow of disposable income.