In its assessment of the economic health of the UK, the OBR has flagged up likely trends for consumers that should make most people pause for thought:
“household consumption outpaces disposable income in our forecast, with the saving ratio falling gradually. Meanwhile, residential investment grows strongly, leaving households’ finances in deficit and the gross debt to income ratio rising towards its pre-crisis peak by the forecast horizon.”
According to the OBR, the household debt ratio is set to rise steadily in the next few years, back to the 170% peak level seen just prior to the financial crisis.
The OBR also expect the saving ratio will fall year-on-year, from 7.2% in 2012 to just 3.2% in 2018.
Both of which will help keep the economy growing, but may ultimately pose risks, as the OBR points out itself:
“[The rising debt ratios and falling saving ratio] seems consistent with supportive monetary policy and other interventions (such as Help to Buy), but it may pose risks to the sustainability of the recovery over the medium term.”
