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Debt Bubble put Britain under pressure

In the last few years, lending policies by banks, building societies and credit card providers combined with a consumer culture of spend now and pay later have resulted in a huge British consumer debt record. The British now collectively owe over one trillion pounds in mortgages, credit cards, overdrafts and HP debt,

The total of British consumer debt is now larger than the external debt of many countries or even continents.

As long as employment stays high and wages continue to rise, this may be sustainable but many critics fear that it will produce a crash on the scale of 1989-92, or even worse. The rise in utility bills in recent years and of bank rates leading to higher mortgage rates is putting increasing pressure on consumers, particularly homeowners who have been on fixed mortgage rates and may face much higher monthly payments when the fixed rate ends, or first time buyers who have borrowed four, five or more times their income to get on the housing ladder. So disposable income is increasingly unable to cope with any increases.

This is why many individuals are remortgaging to pay off expensive loans or credit card balances. Many people who have overextended themselves are finding the normal high street sources such as banks and building societies with their tighter lending policies. closed to them. Instead they are turning to what is known as the sub-prime sector, particularly if they have missed mortgage or credit card payments. They can often arrange a new mortgage that can help them to clear debts, probably at a higher rate than High Street lenders but still better than their existing credit facilities.

The Citizens Advice Bureau, who advise many people on their debt problems say that the most important thing is for people not to bury their heads in the sand hoping their difficulties will go away but to take advice at an early stage.

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Copyright First Union 2007