The Financial Services Authority (FSA) has warned that the still growing mountain of consumer debt could soon begin to engulf the UK economy.
The FSA’s Financial Risk Outlook 2006 warns that a “growing minority” of Britons are risking financial ruin as a result of the increasing amounts owed as homeowner loans or unsecured borrowing.
The UK now collectively owes an estimated £1.1 trillion of consumer credit.
An increase in interest rates or a slip in employment figures could be all that is required to cause large-scale defaults across the UK, warns the FSA, which called on banks to tighten their lending requirements.
“Even in the current benign economic environment, we are seeing signs of growing distress among consumers, including more insolvencies, more late payments on credit cards and a rise in mortgage repossession orders,” the report said.
“Our consumer research shows that many consumers with significant borrowing commitments are currently struggling to keep up with repayments.”
The FSA added that much of the blame lay with consumers, and said that many borrowers had not thought through the consequences of taking on large scale debts.
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