Britain’s Personal Debt more than its GDP

27 08 2008

Despite the credit crunch and the tough criteria of the banks making the borrowing of money hard, the rate at which personal debt rises is greater than the GDP (Gross Domestic Product). The total amount of personal debt, i.e. personal loans, mortgages, credit cards, etc., as of June this year stood at £1.44 trillion which is 7.3% higher as compared to last year. On the other hand, the GDP was £1.41 trillion which had risen by 5.1% as compared to last year.

One of the reason for this rise in personal debt despite it being expensive to borrow may be down to the fact that interest rates on mortgages have risen which lead to an increase in monthly repayments add to that the decrease in household incomes as many people have lost their jobs and many of those still employed have not seen an increase in their salary to match the rate of inflation.

 

Dispatches aired a report on Channel4 on Monday (25 June) which highlighted the plight of homeowners finding it hard to meet the monthly repayments on their mortgages and were faced with repossession. In some cases, up to 125% of the value of the property had been borrowed. Although the banks are seeing their profits drop, it may not be all bad news for them since they are able to recoup their losses by raising the interest rates not only for the mortgage repayments, but also other products such as unsecured personal loans. The CEOs of the top banks are not complaining either since they are receiving pay packets of around £1 million excl. bonuses.

 

Source: http://itn.co.uk/news/b7276faa0a92618f97aedfeb8c37fc05.html      

 

The link to watch Dispatches again on 4OD can be found below.

http://www.channel4.com/video/dispatches/catchup.html

 

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