Excessive Borrowing Raising Concerns at the Bank of England
July 25, 2017
The scale of consumer borrowing around the UK is a cause for concern for economists and should be more of worry than currently seems to be the case for lenders, according to an official from the Bank of England.
Alex Brazier, who is director of financial stability at the bank, addressed an audience recently in Liverpool and took the opportunity to warn about the dangers of excessive indebtedness among consumers.
“Household debt, like most things that are good in moderation, can be dangerous in excess,” he said.
“Dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy.”
Overall consumer debt levels in the UK have been rising in recent months with more and more people borrowing via credit cards and car loans.
Mr Brazier said that he fears lenders are being too quick to provide credit on the basis of what may prove to be misplaced assumptions about the lack of risks involved in doing so.
“Lenders have been the lucky beneficiaries of the benign way the economy has evolved,” he said.
“In expanding the supply of credit, they may be placing undue weight on the recent performance of credit cards and loans in benign conditions,” he said.
Making his case, Mr Brazier pointed out that household incomes have grown on average by roughly 1.5 per cent over the past year but the scale of personal loans, credit card and car loan debts have risen by as much as almost 10 per cent during that same timeframe.
He concluded that the UK’s leading lenders may be “dicing with the spiral of complacency”, which could ultimately lead to borrowers racking up more and more debt while lending standards go from “responsible to reckless very quickly”.
In June, the Bank of England’s governor Mark Carney expressed concerns that the rapidly increasing pace of personal debt growth could be storing up risks for the British economy.
These and other comments from the bank, which sets the country’s base level of interest rates, have prompted concerns that the costs of borrowing could soon be set to rise.
If you live anywhere in Scotland and are struggling to manage your debts the Scotland Debt Solutions can help. Contact us to arrange a free and confidential consultation.
If your credit score has been affected by problem debt, you may be looking for ways to start rebuilding it and getting on with your financial future. Whether you are still struggling with your debt or have entered into an official debt management or insolvency procedure such as a Debt Arrangement Scheme (DAS), Trust Deed […]
If you’re worried that the council might take action against you for non-payment of council tax, entering into a Scottish trust deed can be a beneficial step. It stops legal action by all creditors included in the arrangement, and provides a ‘safe haven’ from which to regain control of your finances. As council tax arrears […]
A debt payment programme (DPP) remains on your credit file for six years, along with other default markers and court judgments that have been made against you. This can seriously affect your ability to borrow for this period of time, and longer. Even if you can secure borrowing, lenders are only likely to offer unfavourable […]
If you owe a debt of £5,000 or less, your creditor may send you a Simple Procedure Notice of Claim. This is a relatively new procedure that was brought in by the Scottish government and commenced on 28th November 2016 – their intention being to make it easier to resolve debt disputes. So if you’ve […]
A Bankruptcy Restriction Order may be made against you if it’s believed that you acted dishonestly, recklessly or unlawfully before you were made bankrupt, or during your bankruptcy. Your Trustee will inform the Accountant in Bankruptcy (AiB), and if their suspicions are upheld, a BRO of 2-15 years can be made depending on the seriousness […]
Debt payment programmes (DPPs) are an intrinsic part of the Debt Arrangement Scheme, which allows you to pay off unsecured debt at an affordable rate. If a debt payment programme is rejected by one or more creditors, the DAS Administrator can apply their discretion on whether to approve the plan, after using a test to […]