some way below its crisis level of 160 %. it dropped sharply after the crisis and has hovered around its current level for the last few years. but though it is below its pre - crisis level, it is again high by historical standards ; average household debt to income between 1990 and 2006 was 110 %. it also remains high by international standards ; household debt to income is around 85 % in germany, 110 % in the united states and 120 % in spain. putting all of these high - level aggregate indicators together, the level of credit in the economy is beginning to grow again. it is not at pre - crisis levels and indeed looks below averages that include the long build - up of credit in the economy before the crisis. but if you look further back, it is high by historical standards. and it is high by international standards. bis central bankers ’ speeches the high - level picture, of course, can only tell you so much. it is clear that important though they are, these high - level indicators cannot be linked mechanically to the assessment of risk or to action to address it. to build a fuller picture of how credit is affecting the level of risk in the financial system, it is necessary to drill down into the sectoral components of credit and their counterparts in the economy. household credit the largest component of bank credit in the uk economy is of course lending to households and within that the great bulk, around 90 %, is secured on dwellings. mortgage lending is the single largest asset class on lenders ’ balance sheets and stock of lending secured on dwellings is around 70 % of gdp. net secured lending to households is rising at nearly 3 % – the highest rate since the end of 2009. mortgage rates in the uk are now at very low levels – average quoted rates on two - year ( 75 % ltv ) fixed - rate mortgages are below 2 %. some of this of course is because the bank of england ’ s official bank rate has been close to zero since 2009. but over the past three years, as banks ’ funding costs have reduced and as competition in the mortgage market has intensified, on average mortgage interest rates have fallen by 2 percentage points. unsecured lending to households is a much smaller proportion of credit ; it accounts for only 12 % of lending to households and around 10 % of gdp. and the stock of consumer credit remains £30 billion below its peak in 2008. but it is growing at around 8 % a year, much faster than secured lending. again

supply of foreign capital from the global savings glut – and in ireland ’ s case, the initial euphoria of european monetary union – made it all cheaper. when the minsky moment finally struck, debt tolerance decisively turned and the kindness of strangers evaporated. uk households swung from borrowing 4 % of gdp annually to saving 2 % of gdp. the comparable swing in ireland was more than twice as large. 3 in the wake of the crisis, three truths came back to the fore. first, while asset prices rise and fall, debt endures. second, the distribution of debt and assets matters. and third, it is very hard to reduce high debt in one sector or region without at least temporarily increasing it in another. the debt tail is wagging the market dog. these realities continue to weigh on the european financial system. it is often argued that the world is awash with liquidity and excessive risk taking. and yet the rain is falling unevenly on the plain leaving some regions parched and others sodden. savings aren ’ t flowing freely to the areas that need them the most. this is certainly true in the euro area, where many savings are trapped and much of finance remains fragmented. while uk corporates accumulated debts to rival their household counterparts, irish corporates surpassed that with debt rising beyond 200 % of gdp. the uk and irish private sectors swung dramatically into surplus ( charts 2 and 3 ). bis central bankers ’ speeches the result is demand compression, weighing on the outlook for growth and sustaining fears that another major adverse shock is possible. risk appetite is more fleeting than median growth forecasts suggest. the constellation of asset price moves since last summer bears this sober assessment out. yields on sovereign bonds have fallen across all maturities. france hasn ’ t borrowed this cheaply since the ‘ 50s – the 1750s. real rates are negative as far as the eye can see, suggesting perpetually anaemic growth. 4 in the past six months, estimates of the equity risk premium have risen by over 100bps in the uk and the euro area back to levels last seen in the heart of the crisis. 5 in addition, the probability of large declines in equity prices implied by options prices rebounded during 2014. this all suggests that investors may be attaching some probability to very bad outcomes, possibly the tail risk of economies becoming stranded in a debt trap. this market view is mirrored in elevated corporate caution. investment remains subdued and businesses continue to build cash