Poor lending practices by banks and building societies have left many in the UK with dangerous levels of debt exposure, a Datamonitor report has warned.
Over-eagerness among finance companies to offer credit cards, homeowner loans and overdrafts to all potential customers has stored up problems for the future, it claimed.
The average adult in the UK owed £4,122 in unsecured personal borrowing at the end of 2005, Datamonitor figures have shown.
Amid the blowback from their earlier policies banks are now restricting their lending, cutting off those who have a legitimate need and means to pay for borrowing.
“In previously pursuing aggressive marketing strategies, lenders are partly responsible for the current situation of high level of indebtedness,” said Karina Purang of Datamonitor.
“They are now facing rising bad debts on past lending decisions, on which they have no control at all.”
While most borrowers are comfortable with their level of debt, a significant minority are a cause for concern and would be particularly at risk in an economic downturn.
Over the last five years the number of people declaring themselves bankrupt has risen at an annual average of 25.4 per cent, reaching 47,287 in 2005.
© Adfero Ltd