£1 trillion debt explained (August 2004)
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Bewitched by credit
The amount of money Britons owe on credit cards, loans and mortgages has topped 1,000 billion pounds - £1 trillion. This is equivalent to £17,000 of debt for every man, woman and child. A trillion pound debt exceeds the whole external debt of Africa and South America combined
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Credit Culture
Low interest rates, inflation and unemployment, combined with high house prices have created a feel-good factor, encouraging people to splash out. The UK was once a credit-shy nation, but debt has now become a fact of life for many - and big business for lenders and financial institutions. |
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Borrowers' gamble
A key characteristic of the current credit binge is the high level of remortgaging. As house prices have doubled over the last five years, many mortgage holders have released equity from the rising value of their homes. Many have used this money for home improvements or to pay off other debts. |
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Debt turns sour?
Some age groups and socio-economic groups have a higher risk of overindebtedness than others. People who own their own homes do not consider debt as much a burden as people who live in council houses. There are concerns that people who have taken on too much debt may have problems repaying should economic conditions worsen and rates rise. |
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The worst debtors?
Debt in the UK may be at historical highs, but borrowing is also at record levels internationally. In the Netherlands household debt is worth almost twice income, whereas in the UK it is substantially less. However, while rates remain low the cost of borrowing is easy for many. |
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Credit happy?
The UK has one of the most favourable views of credit in Europe, with many agreeing that credit is useful. However, the Spanish and Irish are even more ebullient about borrowing. In contrast, Germans are among the most credit averse, because of strict lending criteria.
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