UK consumer debt hits £1 trillion

Reply Thu 29 Jul, 2004 06:39 am
Thursday, 29 July, 2004,
The amount of money owed by consumers has broken through the symbolic £1 trillion barrier for the first time.
The Bank of England (BoE) has said that consumers owe more than £1,000bn on cards, mortgages and loans.

According to the BoE, about 80% of UK personal debt is in the form of loans secured against homes, such as mortgages and re-mortgages.

Debt charities are warning consumers to think hard about how to manage their debts as interest rates rise.

According to the National Consumer Council, about six million families are already struggling to keep up with credit commitments.

Meanwhile, Citizens Advice has seen a 44% increase in the number of people seeking help for debt problems over the past six years.

"We have been warning for some time now that personal debt problems threaten to overwhelm large numbers of people in this country, with potentially devastating consequences," said Teresa Perchard of Citizens Advice.

The BoE has raised interest rates four times since November, taking the base rate to 4.5%.

Concern growing

The Bank of England's rate-setting committee meets next week to decide whether to lift rates again.

The rate setters will be balancing their wish to restrain inflation, as well as galloping house prices and consumer spending and debt levels, against a desire not to cause sudden downturns in growth, manufacturing, property prices or consumer spending.

Some debt advice groups have said further interest rate rises could force heavily indebted consumers into deep trouble.

But the Bank of England's chief economist Charles Bean yesterday played down concern about growing debt.

The £1 trillion figure, he said, did not mean UK households were sitting on a "time-bomb", since an increase in borrowing had been matched by an increase in financial assets.

But workers on the debt frontline remain worried about the personal cost of taking on too much debt.

"Interest rates are still at a historically low level and people seem to be managing their repayments," Malcolm Hurlston, founder of debt charity the Consumer Credit Counselling Service told BBC News Online.

"But there are now a trillion reasons why consumers need to stop and think if they can afford their debt burden, particularly if interest rates go up."

Story from BBC NEWS:
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Walter Hinteler
Reply Thu 29 Jul, 2004 06:41 am
Bewitched by credit
The amount of money Britons owe on credit cards, loans and mortgages has topped 1,000 billion pounds - £1 trillion.

This is equivalent to £17,000 of debt for every man, woman and child.

A trillion pound debt exceeds the whole external debt of Africa and South America combined.

Borrowers' gamble
A key characteristic of the current credit binge is the high level of remortgaging.

As house prices have doubled over the last five years, many mortgage holders have released equity from the rising value of their homes.

Many have used this money for home improvements or to pay off other debts.

Debt turns sour?
Some age groups and socio-economic groups have a higher risk of overindebtedness than others.

People who own their own homes do not consider debt as much a burden as people who live in council houses.

There are concerns that people who have taken on too much debt may have problems repaying should economic conditions worsen and rates rise.
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Walter Hinteler
Reply Thu 29 Jul, 2004 06:43 am
The worst debtors?
Debt in the UK may be at historical highs, but borrowing is also at record levels internationally.

In the Netherlands household debt is worth almost twice income, whereas in the UK it is substantially less.

However, while rates remain low the cost of borrowing is easy for many.

Credit happy?
The UK has one of the most favourable views of credit in Europe, with many agreeing that credit is useful.

However, the Spanish and Irish are even more ebullient about borrowing.

In contrast, Germans are among the most credit averse, because of strict lending criteria.
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Reply Sat 31 Jul, 2004 04:05 am
Always look on the bright side of life.
Great post. Thanks for info. Graphics are very nice.
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Reply Sat 31 Jul, 2004 04:09 am
Re: Always look on the bright side of life.
coming wrote:
Graphics are very nice.

of course, BBC is always the best news source.
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