UK Debt Mountain Still Growing?
"Personal debt exceeding Britain's GDP is a worrying milestone in our buy-now-and-pay-later culture," said Martin Bamford, a personal finance adviser and author in Surrey, England. There is more debt than the value of all the goods and services produced by its economy in a year, according to accounting firm Grant Thornton.”
Personal debt in Britain is growing by $1 million every two minutes, according to Credit Action, a non-profit financial education group. This is twice the rate it grew last year. The total debt more than doubled in less than a year, and currently stands at 2.7 trillion dollars.
Households in the UK owe 166 percent of their annual disposable income, 30 percent higher than their counterparts in the United States.
However, unlike the US, consumers in the UK are using their debt to build wealth. House prices recently broke through the $600,000 mark in London. This increase is partially fuelled by foreign investors, partly by immigration, and in part, the result of $2 million bonuses handed out in the financial sector, and a consequence of investment money rolling into the city as it prepares to host the 2012 Summer Olympics.
This paints a different picture of the debt mountain, one that reflects a growing economy, unlike the US market which offered billions of dollars in mortgage money to people who could not afford a mortgage.
This did not stop the number of people declaring bankruptcy from jumping to 28 percent between June 2006 and 2007. The number of home repossessions soared 30 percent in this fiscal year.
Mortgage experts are pessimistic. Despite the recent £10 billion injection into the mortgage market by the Bank of England, mortgage rates for 230,000 to 300,000 sub-prime borrowers in the UK will increase to unaffordable levels, at least 10 per cent, before their mortgage term ends. This will force the debt mountain higher, distorting the economic forecast further.
Published on September 25, 2007
Digg | 
del.icio.us | 
StumbleUpon | 
Reddit | 
Yahoo! | 
My favourites
Latest Finance Articles
Darling's Budget Report Highlights
Chancellor Alistair Darling delivers his first Budget Report yesterday. Highlighted in this article are some of the main points... Read More
March 13, 2008
Lending Falls Again Says CML
The amounts borrowed by first-time buyers and home movers continue to drop as the credit crunch takes further grip on the UK mortgage market. Remortgage activity is on the increase as many switch from fixed-rate deals to tracker mortgages in anticipation of further base rate decreases from the Bank of England... Read More
March 12, 2008
10 Tips To Improve Your Credit
Now more than ever our credit rating affects our ability to borrow credit. Here are 10 tips to help you improve your credit score... Read More
March 7, 2008
Interest Rates Kept At 5.25%
Yesterday, 6th March, the MPC decided to keep the base rate at 5.25 per cent. This decision was to be expected as the Bank focuses on the pressures of rising inflation and a slowing economy. Analysts are predicting another cut to 5 per cent to happen in May unless economic conditions weaken substantially. Whilst some feel the MPC shouldn't wait too long before the next cut, many agree with yesterday's decision... Read More
March 7, 2008
20 Per Cent Of Homeowners Fear Repayments
The UK's financial watchdog, the FSA, published a survey of over 500 mortgage holders which revealed 1 in 5 are worried about being unable to keep up with their mortgage repayments. It is estimated that 1.4 million fixed-rate or discount deals will expire this year raising monthly repayment amounts. Twenty five per cent of those surveyed admitted they had no contingency plans to meet these costs... Read More
March 6, 2008
Refer a Friend
Why not tell a friend about Money Outlet? Click here
Post a Comment