Britons are borrowing money at a rate of £1million every four minutes – and have taken on enough debt to buy five million top-of-the-range Rolls Royce’s. Borrowers have now ploughed through the £1trillion mark with mortgages, loans, overdrafts, hire purchase, and on credit and debit cards. The boom in borrowing has been put down to soaring house prices, low unemployment and low interest rates. Part of the surge has been fuelled by lenders making it even easier for consumers to get into debt. But consumer groups warn that rising interest rates could make debts unmanageable for millions.
The Bank of England has raised interest rates four times since November, taking the base rate to 4.5 per cent, in an effort to rein in Britain’s housing boom. Concern is now mounting about a further quarter-point increase next week. Last month, people took on an additional £11.23bi1lion of debt – the largest rise since September 2003. Bank of England figures showed that 82.4 per cent of personal debt – £827.3million – has now been borrowed in mortgages. The remainder, £176.98million, has been notched up on bank and building society loans, overdrafts, credit cards and HP. But Bank of England chief economist Charlie Bean yesterday dismissed talk of a debt timebomb. He said more people had chosen to borrow money to invest in houses and other assets rather than to fund a spending spree. He claims higher interest rates will only spell trouble for a fraction of households.
Shadow Chancellor Oliver Letwin said: It took six hundred years of banking history for household debt to reach half a trillion pounds. Now, under seven years of Labour, this has doubled. What else can we expect from a Government that persistently attacks pensions and has decimated the savings culture? Gordon Brown continues to take £5billion a year out of pension funds, while the savings ratio has halved since 1997.
(Daily Express 30th July 2004)