Credit card borrowing up £500million to £29.9billion. Mortgage lending up 19.5% to £24.5billion. Pleas for advice on debt rise by 44% to over one million. Families went on a record spending binge last month, pushing Britain’s personal debt total closer to an incredible trillion. The spree raised the prospect of a sharp rise in interest rates to try to cool things down. The Bank of England was already under pressure to push up the base rate by as much as 0.5 per cent next month in a bid to take the heat out of the runaway property market and High Street spending.
Figures published yesterday showed that mortgage lending in March was £24.5billion – a record for the month. That is 19.5 per cent up on February, said the Council of Mortgage Lenders. And it is an increase of 25 per cent on March last year, confirming that the property market is booming. In addition, the British Bankers Association, which represents major High Street names, said credit card debt rose by £500million in March to £29.9billlon. The total amount outstanding on personal loans, overdrafts and other credit rose by almost £1billion. All the figures indicate that personal debt is set to bust through the £1trillion barrier this autumn.

Consumer groups and MPs have warned of a personal debt crisis: Yesterday even the Council of Mortgage Lenders warned against borrowing too much. Director Michael Cogan said: ‘In these circumstances, we would urge borrowers to think carefully about how they would cope with higher interest rates.’ Deirdre Hutton, chairman of the National Consumer Council, accused banks of recklessly chucking cash at people. ‘Britain is in the grip of a credit binge,’ she said. ‘It has been reported that six million families have been caught in the debt trap and are having difficulties meeting re-payments.’

Citizens Advice said it has seen a 44 per cent increase in pleas for help from those in debt over the past six years. It is dealing with more than one million debts inquiries a year. Policy director Teresa Perchard said: ‘Our research shows we are at a critical stage where personal debt problems threaten to overwhelm large numbers of people.’ Britain’s economic boom of the last few years has been built on a property market bubble. But yesterday, the International Monetary Fund warned of the possibility of a crash.

(Daily Mail April 23rd 2004)