Bank of England Poll Shows Growth in Debt
A survey carried out by the Bank of England showed millions of Britons are being adversely affected by debt. Even as households cut spending or borrowed more to cover expenses, almost one million families consistently had problems paying off mortgages and another 1.8 million individuals reported, ‘at least occasionally’ encountering problems with debt repayments.
Interest rates have mounted drastically for homeowners and yearly mortgage payments rose to £3.6 billion in the last 12 months. As banks continue to tighten their lending policies, the number of households encountering debt is expected to rise over the next two years.
Half of the families included in the Bank’s Quarterly Bulletin survey were forced to reduce their spending and another 10% of households have been pushed to borrow more or extend their mortgages. In an effort to make mortgage repayments, another 10% of homeowners are taking on second jobs, freelancing or working overtime. With lower incomes, renters are being hit hardest as 28% of individuals report trouble paying debt ‘at least some of the time’.
The Bank of England’s survey was taken in September, when the current credit crisis was just beginning. At the beginning of the New Year, many are seeing even worse financial situations than during the latter half of 2007. Even more damaging, a portion of homeowners are unable to utilize the quarter-point interest rate cut mandated by the Bank of England earlier this month - as their lenders are failing to pass the savings to their customers.
Conversely, the Chief Economic Adviser of The Confederation of British Industry said that while the slowdown of the economy may seem to overwhelm the year’s strong growth, the fundamentals of our economy remain sound and talk of a full-blown recession is exaggerated.