Private consumption feared to be crimped as interest rates escalate

Households seen to cut back on spending.

According to Credit Suisse, although the risk of a household debt crisis looks to be very small, assuming of course that leverage levels haven't increased significantly relative to assets and income in the meantime, that's not to say that there won't be some fall-out to the broader economy as and when short-term interest rates increase.

The chances are private consumption will inevitably be crimped once rates rise.

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In particular, households that have over-leveraged themselves (though still a small proportion of all households) will likely have to cut back on their discretionary spending.

Based on the CS equity research proprietary housing survey, 72% of respondents said that they can save at least 5% of total income if they reduce unnecessary expenditure (sufficient to offset at least a 12% increase in mortgage installments, or around 100 bps of interest rate increases).

Interestingly too, 43% of respondents know of people who may have trouble meeting mortgage repayments or people with mortgage repayments who are living on an extremely tight budget.