Thrifty Loans

Brits are clearly relying on borrowed money more than ever before The average Briton now owes £33,000 compares with £17,000 in 2000. That’s nearly a doubling of debt in seven years.

The main reason for the increase in debt is because of rising house prices and increased mortgages. Gloomily, experts are predicting that tough times are coming for consumers in the wake of the global credit crunch. With banks having tightened their lending criteria, it is unlikely that credit will be easy to come by in the foreseeable future.

Accountants Pricewaterhouse Coopers say that families will find it more difficult to borrow money for the expensive Christmas period, as banks are turning down an increasing number of applications of credit cards, overdrafts and loans. The oldest and biggest of them all – Barclaycard – are now turning away half of all applications of a card. Richard Thompson, a partner at the firm, said: “There are tough times ahead for both consumers and credit card companies. Banks are continuing to take action in response to the rise in consumer debt by tightening their credit acceptance policies.”

The number of people going bankrupt could well increase in the New Year, with finances made worse for many people coming off cheap fixed rate mortgages in the next 12 months or so. An average of £140 per month could be added to monthly mortgage repayments for those who can’t find a cheap new deal, with some seeing payments go up by 60%.

Cheap credit over the last decade has pushed Britons deeper and deeper into the red, to the tune of £1.3 trillion in total, up by nearly 10% in just the last year.

There might be knock-on effects for the economy if there’s a squeeze on credit this Christmas, as it could reduce consumer spending with terrible consequences for retailers in the their busiest period in the weeks leading to Christmas. Economists in the City are already forecasting a drop in economic growth in 2008 to 2% or lower, compared with 3% in 2007

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