'UK at risk due to unsustainable levels of household debt' says academic

Posted by ap507 at May 19, 2014 03:25 PM |
Professor James Fitchett featured in new Verum consumer credit report warning of unsustainable mortgage debt with UK house prices

Professor James Fitchett (pictured) from the School of Management has been featured in a new report on consumer credit by independent research company Verum Financial Research, which suggests that the UK economy is risking a major downturn due to unsustainable levels of household debt.

Describing the recovery as ‘extremely fragile’, the Verum Consumer Credit Trends Report for May 2014 has calculated that every 0.5% increase in the Bank of England base rate would result in a £4.8bn reduction in household spending. If the base rate increased to 3% it would tip the UK economy back into recession.

Professor Fitchett says in a foreword to the report: “The main problem facing the UK economy is therefore now a problem concerning consumer spending and debt. As these data show in considerable detail, the prospect of even slightly higher marginal lending rates could have a catastrophic effect on the economy.”

The Verum report warns that household debt remains unsustainably high due to spiralling mortgage debt. Total household debt increased by 314% from £347bn in 1990 to £1,437bn in 2013, of which 89% was mortgage debt. House prices increased by 318% over the same period, while household incomes have risen by only 203%.

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