31/3/17.

The Bank of England is worried about household borrowing.

This week, the Bank’s Financial Policy Committee, whose job is to identify and tackle risks to the UK’s financial system, warned that household indebtedness was high by historical standards and was starting to rise relative to incomes.

It added: “Consumer credit has been growing particularly rapidly. This could…represent a risk to lenders if accompanied by weaker underwriting standards.”

But are the British, returning to the dangerous position they were in  before the financial crisis, living beyond their means?

The latest figures, published the day Britain began divorce proceedings with the EU, sent mixed messages.

Total household borrowing in February, of £4.9bn, was only slightly up on January and was in line with the six-month average. Household borrowing is growing at annual rate of 3.9%, which is actually lower than in November and December.

The current low interest rates mean that debt repayment levels for UK households are at the most affordable in 15 years but it would not take much to change this situation.

Remember that the vast majority of household borrowing is done via the home mortgage.  In February this was not that different, with mortgage borrowing growing by £3.5bn – up from January but down from December and, again, in line with recent growth. So it can hardly be said mortgage borrowing is getting out of control

What concerns the FPC and others more is the growth in unsecured borrowing – credit cards, personal loans, bank overdrafts and so on. Here, too, it is a mixed picture. Consumer borrowing last month grew at an annual rate of 10.5%. That looks uncomfortably close to the levels seen during the boom year of 2006 and yet represents a sharp slowdown from the 10.9% growth rate seen last November. The actual sum borrowed, £1.4bn, was £200m less than in January and was the second-lowest monthly total since July last year.

It is also worth bearing in mind that, between the start of the financial crisis in 2008 and 2013, there was a sharp contraction in unsecured borrowing. It should be no surprise to see it recovering.

Remember also that much of the growth in unsecured borrowing in recent times reflects how Britons now buy cars via so-called Personal Contract Purchase (PCP) deals. These, arguably, are less risky than other forms of unsecured lending because the cars at the centre of the deals effectively act as a form of collateral.

The main cause for concern, though, is credit card borrowing. This rose last month at an annual rate of 9.3%, a pace not seen since February 2006, which looks on the high side.

However, as Antonio Horta-Osorio, the chief executive of Lloyds Banking Group – the UK’s biggest mortgage lender and current account provider – noted recently, outstanding card balances as a proportion of household income remain below pre-crisis levels, having fallen from 6.5% in 2005 to 5.2% last year.

This increase should not surprise. The cost of credit has fallen to historic lows in response to the Bank’s own efforts to stimulate growth while, as the Governor Mark Carney observed this week, there has been a marked rise in the interest-free periods that customers transferring credit card balances are being offered by their new lenders. The likes of the Halifax are currently offering interest-free periods of 30 months.

There is a danger, though, in looking at these numbers in isolation. They need to be seen in the overall context of the economy. On that basis, consumer borrowing, as a proportion of overall Gross Domestic product (GDP) is beginning to rise again, but remains comfortably below the levels it hit between 2008 and 2012. Household wealth has also been growing while unemployment is at historically low levels.

The biggest worry, when borrowing rises, is the borrower’s ability to service the extra debt they are taking on. With interest rates at ultra-low levels, this is not yet a problem. Low interest rates mean the total debt repayment levels of UK households are the most affordable for 15 years.

Yet it would not take much to change this benign picture. The recovery in house prices since the end of the crisis is petering out, which may leave consumers feeling less wealthy, while further falls in the pound could force the Bank to raise the cost of borrowing more rapidly than it would like.

So the Bank is right to flag concerns. Consumer borrowing and debt levels are not yet out of hand. But more rapid growth in either, from here, would be undesirable.