You are here: Home - Credit Cards & Loans - News -

UK debt boom bigger than the 1980s, says Fitch

0
Written by:
09/05/2018
A boom in consumer credit has seen UK households now borrowing more than they are saving, for the first time since the 1980s, according to a leading credit rating agency.

This last happened in the ‘Lawson boom’, 30 years ago, when Nigel Lawson was chancellor of the Exchequer. There has been a huge swing over the past year from saving to borrowing, said Fitch.

The group said there were two main factors behind the trend: greater residential investment and lower private pensions savings relative to income. It added that the UK household sector’s worsening financial health reduces consumer resilience to income or interest rate shocks, while also presenting risks for UK consumer loan portfolios.

However, the amount that consumers are paying to service their debts hasn’t risen because interest rates have stayed low. Fitch said that the effective interest rate on all UK household debt fell to 3.3% last year. The fall in the effective interest rate has saved household borrowers £20bn-£25bn in interest payments since 2009.

The group said: “A major interest rate shock appears unlikely (we forecast the UK base rate to rise gradually, to 1.25% by end-2019), but a more immediate shock could come from tightening credit supply. The impact of the Brexit referendum on real wages may be fading, but Brexit uncertainty creates risks of a bigger shock to growth and employment.”

The Bank of England makes its decision on interest rates this week. It had been widely expected to raise rates by 0.25%, but recent weak GDP growth, inflation and business statistics have made a rise less likely. Even if the Bank of England chooses to raise rates this week, most economists expect this to be ‘one and done’, with no further rises for the rest of the year.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

It’s time to get your finances in shape, and moving your cash savings to a higher paying deal is a good plac...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week