If loans to SME’s, overdrafts and credit cards are excluded, the ratio is 4 per cent. From a financial stability perspective, we also need to consider whether it is likely to lead to asset price bubbles elsewhere in the system. The housing market remains very subdued, with some of the house price indices still reflecting falling prices.
Although the equity market reached an all-time high in April before falling back in recent days following increased global risk aversion, it would be difficult to argue that this is a bubble. In any event the link between high rates of growth in unsecured lending and equity or bond price movements is extremely tenuous at best.