World Business

For the secondary year in a broil, the amount of total debt held by British citizens came to in greater numbers than the country’s gross domestic issue

by James Daley

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The total amount of UK personal shortcoming has exceeded the country’s entire GDP for the second year running.

According to the accountants Grant Thornton, the total amount of unpaid debt amassed from one side mortgages, loans and credit cards rose by 7.3 per cent to £1.44 trillion over the year to June 2008, up from £1.35 trillion the previous year. UK GDP is estimated to be £1.41 trillion, having increased by just 5.1 per cent in titular terms from one side of to the other the past year.

The survey shows that Britain’s appetite for debt does not appear to be easing, even as the credit crunch has made new loans harder to come by.

The amount of borrowing has soared in recent years to be ascribed to a prolonged period of low concern rates. However, there is some evidence that a growing number of consumers are now struggling to suitable their payments. Levels of home repossessions have risen roughly over the past year, while banks have reported a rise in the number of customers defaulting on personal loans.

Stephen Gifford, Grant Thornton’s chief economist, reported: “Despite the global downturn flattening the growth of personal debt and UK GDP over the past few habitation, debt levels continue to increase at a faster rate than the income the UK generates. Although there is no cause for fright as personal debt is well covered by the UK housing stock, the figures clearly exemplify the continuing problem of augmenting personal debt levels in the UK. If the property market and plan subsist constant to weaken, the current levels of personal debt will be proper for unsustainable and there will be a marked increase in personal insolvencies.”

House prices have already fallen around 10 through cent over the accomplished year, wiping almost £400bn off the entire value of trappings stock.

Although repossessions and personal insolvencies have so far remained at relatively low levels, Mr Gifford uttered he expected the numbers to increase extremely the coming year.

“Typically, there is a lag between individuals facing tough financial environment and when they be changed to insolvent,” he said. “It will be the next six to 12 months which reveal for what reason seriously the credit crunch has affected individuals.”

If credit remains hard to come by, it is likely that consumers will be enforced to start paying from a thin to a dense state their debts over the coming year. Already, it has become difficult to remortgage if you effect not have at minutest 10 per cent equity in your to one’s home.

However, Mr Gifford peaked out that any wider move to reduce shortcoming would affect the speed at which the UK established order grows.