Warning as rise in personal loans outstrips growth in wage rises - Palmers Solicitors

Warning as rise in personal loans outstrips growth in wage rises

Warning as rise in personal loans outstrips growth in wage rises

A senior director of the Bank of England has warned that household debt is spiralling and could pose a risk to the stability of the country’s economy.

Alex Brazier, the Bank’s Financial Stability Director, pointed to a 10 per cent increase in personal loans for cars as well as credit card transfers and other personal loans, which have increased by 10 per cent in the past year.

By comparison, household incomes wave grown by a much more modest figure of just 1.5 per cent.

“Household debt – like most things that are good in moderation – can be dangerous in excess”, Mr Brazier said.

He also warned that such an increase in debt was “dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy”.

Mr Brazier accused High Street banks of entering “a spiral of complacency” about mounting consumer debt levels, saying: “Lending standards can go from responsible to reckless very quickly.

“The sorry fact is that as lenders think the risks they face are falling, the risks they – and the wider economy face – are actually growing.”

Mr Brazier’s comments, which were made during a speech to the University of Liverpool’s Institute for Risk and Uncertainty, follows a warning from the Bank of England’s Governor, Mark Carney, who claimed that ‘lenders appear to have forgotten some of the lessons of the financial crisis.’

Despite his words or warning, Mr Carney has been quick to point out that the UK financial system is in far better shape than at the time of the 2008/09 banking crash.

Andrew Skinner, a Partner and legal expert on debt recovery with Palmers, said: “Debt of any kind, whether it be a mortgage or a personal loan can be a delicate balancing act. A change in personal financial circumstances can easily lead to repayment issues and demands from creditors.

“It is important to remember that if personal loan repayments become a real concern, there is expert help available to help consolidate debt, to avoid legal action being taken by creditors.

“Anyone who finds themselves in financial difficulties should seek advice at the earliest opportunity to mitigate the debt.”

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