UK’s Consumer Debt Binge Worrying the Bank of England

April 5, 2017

The growth in consumer debt among households throughout the UK has been highlighted as a cause for concern by the Bank of England.

Policymakers at the central bank have suggested that the issue could ultimately pose a threat to the financial security and stability of lenders if they’re offering credit too freely to people who subsequently become unable to pay back their debts.

The bank’s concerns are based on its own data which show that the scale of consumer credit nationwide has been rising “particularly rapidly” in recent months.

“It had reached an annual growth rate of 10.9 per cent in November 2016 – the fastest rate of expansion since 2005,” the bank’s financial policy committee (FPC) members noted during a meeting in late March.

Meanwhile, official data has also shown that credit card debt levels across the UK increased more sharply during February 2017 than they have during any single month over the past 11 years.

The issue of credit card debt in particular has been in the news of late with the Financial Conduct Authority (FCA) making clear that it wants to see lenders in the sector doing much more to help people who struggle with sizable debts on a persistent basis.

Bank of England policymakers are worried about the rise in credit card debts as well but have also pointed out that the use of personal loans and car finance continues to rise.

“Dealership car finance had seen the fastest expansion in recent years,” notes from the FPC’s recent meeting said.

“Credit cards and personal loans contributed materially to the acceleration in consumer credit in 2016,” they continued.

The FCA recently revealed its estimate that there are close to 3.3 million people in the UK who can be considered to have persistent credit card debt problems.

That description is given to people whose credit card debt problems have been getting progressively worse for a period of 18 months or longer.

For its part, the debt help charity StepChange has said that credit card debt “remains the biggest single category of problem debt” for its clients throughout the UK.

If you live anywhere in Scotland and have high levels of any form of consumer debt then Scotland Debt Solutions can help. Contact us today to arrange a free and confidential consultation.