New Debt Boom ‘Could Leave British Borrowers Vulnerable’
July 16, 2015
A new debt boom could be leaving UK consumers vulnerable to financial strain and serious difficulty if economic conditions were to worsen in the coming months and years.
That’s according to the international credit ratings agency Moody’s, which has published a new report claiming that the rate at which debts are being taken on by individuals and households in the UK is outstripping wage growth.
The worry is that there are consumers around the country taking on levels of debt which might only be sustainable in the near term and which could become more burdensome than anticipated if the UK economy were to take a turn for the worse.
Moody’s reports that consumer spending around the UK is already higher than was the case prior to the financial crisis, which presented millions of indebted Brits with serious financial headaches to contend with in 2008, 2009 and beyond.
“Low interest rates are hiding the risk to consumers, making consumer debt appear more affordable on the surface, but masking potentially negative long-term consequences,” said Greg O’Reilly, an assistant vice president and leading analyst at Moody’s.
“Consumer spending has surpassed pre-crisis levels, at a time when growth in unsecured consumer debt is outstripping wage growth,” he noted.
Despite its concerns, Moody’s takes the view that relatively low levels of unemployment and extremely low interest rates should help to ensure that British consumers can keep up with their debt repayments at least for the foreseeable future.
However, on the other hand, there are fears that a lack of wage growth and relatively low levels of savings are leaving Brits with limited financial flexibility in many cases.
The rating agency’s research suggests that both consumer spending and our appetite for debt has expanded very considerably in the UK since 2012 with unsecured lending to individuals around the country having jumped by 7 per cent year-on-year for the past 3 years.
Last month, the British Bankers’ Association reported that the rate of unsecured borrowing among consumers around the UK is increasing at an annual rate of 5 per cent, the fastest pace of growth recorded since 2010.
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 […]
If you’re struggling to pay your unsecured debts, a debt payment programme could help you to regain control of the situation, and become financially stable again. Debt payment programmes are a fundamental part of the Debt Arrangement Scheme (DAS) in Scotland, and allow you to repay over a longer period of time. These programmes involve […]