29/07/2004

Consumers smash £1 trillion debt barrier

The credit boom has reached a new high, with British consumers now owing more than £1 trillion on their credit cards, mortgages and loans, it has emerged today.

According to the Bank of England, consumers took on £11.23 billion more debt in June – tipping personal debt over the trillion-pound mark for the first time.

The National Consumer Council (NCC) has warned lenders to be more responsible to ward off a debt crisis. Anyone with more than four credit commitments, or spending more than 50% of their before-tax income on repayments is especially at risk, the council said.

NCC chairman Deirdre Hutton said that the situation had become dire for six million British families who are struggling to keep on top of their credit commitments. Even a small increase in interest rates could tip many more into a spiral of financial despair, she warned.

"Now is the time for people to take stock of their borrowing commitments and to think twice before taking on further debt. Lenders must adopt more responsible lending practices – checking the full picture of a borrower’s income and existing mortgage and other credit commitments when assessing creditworthiness," she said.

"A good past record of repayment isn’t always a guide to future payment patterns."

The Bank of England, which has upped interest rates four times since last November in an effort to cool the consumer boom, meets again next week to consider whether a further rise is necessary to curb inflationary pressures on the economy.

(gmcg)

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