Equity 1 Group
Pushing back the frontiers of economic ignorance and restoring sound financial foundations, one family at a time.

Debt binge of £203 BILLION threatens to sink the UK economy as the IMF warns of a new financial crash looming.

DailyMail  |  Hugo Duncan

A surge in borrowing is paving the way for another financial crisis.  The latest figures show British households have racked up unsecured debts of £203 billion on credit cards, car finance, overdrafts and other loans.

A surge in household borrowing is paving the way for another financial crisis, according to the International Monetary Fund

 

  • The IMF has warned of a new financial disaster, ten years on from the last 
  • Household debt levels have surged back to 137pc over the past two years
  • Officials now fear UK lenders could lose £30bn in the next downturn

 

A surge in household borrowing is paving the way for another financial crisis, according to the International Monetary Fund.

In a hard-hitting report published ahead of its annual meetings in Washington this week, the watchdog warned of ‘risks down the road’ from rising levels of debt.

And raising the prospect of a new financial disaster, ten years on from the last, the Fund said: ‘Higher household debt is associated with a greater probability of a banking crisis, especially when debt is already high.

A surge in household borrowing is paving the way for another financial crisis, according to the International Monetary Fund.

In a hard-hitting report published ahead of its annual meetings in Washington this week, the watchdog warned of ‘risks down the road’ from rising levels of debt.

And raising the prospect of a new financial disaster, ten years on from the last, the Fund said: ‘Higher household debt is associated with a greater probability of a banking crisis, especially when debt is already high.

Central bank officials now fear UK lenders could lose £30 billion in the next downturn as heavily indebted borrowers struggle to pay back what they owe.

‘Growing debt levels signal risks down the road,’ said IMF economists Claudio Raddatz and Jay Surti. 

‘Periods of robust growth and seeming calm in financial markets can be followed by a sudden surge in market volatility and an unexpected economic downdraft.’

Given the misery the crisis caused, you might think people have become skittish about borrowing more. Surprisingly, that’s not the case.

Fellow IMF official Nico Valckx said economies can initially benefit from rising levels of household debt as the extra spending boosts the economy.

But he warned risks then begin to mount. 

‘Debt greases the wheels of the economy,’ Valckx said. ‘It allows individuals to make big investments today – like buying a house or going to college – by pledging some of their future earnings. That’s all fine in theory.

‘But as the global financial crisis showed, rapid growth in household debt – especially mortgages – can be dangerous.’

The IMF warned that households were binging on debt once again as memories of the last financial crisis faded.

‘Given the misery the crisis caused, you might think people have become skittish about borrowing more,’ said Valckx. ‘Surprisingly, that’s not the case.’

Advertisements

No Responses to “Debt binge of £203 BILLION threatens to sink the UK economy as the IMF warns of a new financial crash looming.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: