The Bank of England has said it will consider steps to protect financial stability if household debt rises quicker than the rest of the economy.
British household debt, measured as a share of income, has fallen substantially from its peak during the financial crisis, and has now stabilised to levels as seen in 2004 .
Deputy Governor, Sir Jon Cunliffe, said he did not want a return to the situation pre-financial crisis, where credit grew twice as fast as the economy as a whole.
“If credit began to grow faster than GDP, I would want to think very seriously about taking action to manage that sooner rather than later,” he said at a conference hosted by the British Property Federation .
During the decade up to 2007, credit growth was more than double the rate of growth in the economy; at its peak in 2009, credit was 177% of GDP .
Cunliffe said most of this lending was to UK households. The stock of households’ debt relative to their income surged from the late 1990s to 155% by 2007. It then fell to 135% in 2012 and currently remains at that level .
Cunliffe, who sits on the Financial Policy Committee (FPC), said it was up to the FPC to monitor the credit cycle, and has powers to rein in sectors it regards as riskier.
British households took on unsecured debt at the fastest pace in nearly 10 years in December, according to official data, with £4.4bn borrowed on credit cards and taken as personal loans .
Andy Haldane, the Bank’s Chief Economist, said last year that growth in personal loans was “picking up at a rate of knots” as the interest rates on these loans continued to fall .
However, Cunliffe said high levels of debt could amplify another downturn as households cut back on all but essential spending. This would warrant early action if danger signs started to emerge again.
“Just as financial cycles build up over a number of years, the risks they pose are perhaps best managed over time,” he said .
 Reuters UK. ‘Bank of England deputy says may act if lending speeds up’. uk.reuters.com
 The Guardian. ‘Bank of England’s deputy governor monitoring credit growth’. theguardian.com
 Telegraph. ‘Bank of England poised to act if household debt spirals’. telegraph.co.uk