16 March 2006
The UK is not on the verge of a borrowing meltdown despite increasing levels of indebtedness, according to Alliance & Leicester.
Household debt has more than tripled from £337 billion at the end of 1990 to £1.16 billion by the end of 2005 with unsecured borrowing seeing a fourfold increase, rising to £135 billion during the same period.
But according to the Alliance & Leicester borrowing monitor, base rates would have to more than double from their current level of 4.5% before the UK was plunged into a debt crunch like that which occurred in 1990, leading to thousands of homeowners losing their homes.
Chris Rhodes, managing director of Alliance & Leicester Retail Banking, said: "Our research shows that although borrowing is higher than in the past - UK households overall are in good financial shape.
"Credit card and personal loan arrears and defaults are showing a modest increase. Since the cost of servicing this debt remains at relatively low levels, other factors are clearly at work. With changed attitudes to debt and increasing costs such as gas, electricity and council tax, some households particularly those in the private rented sector are facing increased strain.
"However, with stable levels of interest rates and high levels of employment, the UK is far from being on the verge of a debt crisis."
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