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Low Base Rates keep stress down

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16/03/2006

Base rates must double for 1990s-style debt stress to return, a new report into household borrowing has revealed.

Research from Alliance & Leicester into mortgage and unsecured debt shows the UK is a long way away from returning to the bad old days of the early 1990s, when households had high mortgage repayments, despite increasing levels of borrowing.

UK household debt now stands at £1,160 billion, with the average household that has a mortgage owing £83,722.

However Alliance & Leicester said that this level of borrowing remained “comfortable” compared to historic levels, and that the Base Rate would have to reach 8.5 per cent for the UK to experience a debt crunch similar to that seen in the 1990s.

Alliance & Leicester Retail Banking managing director, Chris Rhodes, said: “Our research shows that although borrowing is higher than in the past – UK households overall are in good financial shape.

“Over the past ten years interest rates have remained fairly stable and economists believe there is no real prospect of interest rates reaching 8.5% – the level they would need to reach to cause 1990-level stress.”

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