The credit crunch may reduce the amount of borrowings as more people are rejected for loans, reports Equifax.

External affairs director Neil Munroe stated that the current financial markets are leading to a tightening of lending criteria, causing banks to reject more borrowers.

However, he also stated that for people who really need the money, they may be forced to seek help from more expensive lenders.

"They may be forced into more higher cost borrowing, so forced down into the sub-prime or near-prime market, whereas before they might not have considered going down there," Mr Munroe explained.

However, this is a trend that has probably been occurring for the past few months now, he added.

At the end of February, UK personal debt stood at £1,421, a rise of 8.9 per cent over the previous year, equating to a £111 billion increase, reports Credit Action.

The organisation also reveals that the average household owes £9,100 excluding mortgages.

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