The Bank of England (BoE) has warned that a significant rise in personal debt could ‘pose a danger to the UK economy’.
The Bank revealed that car loans, credit card balance transfers and personal loans have increased by 10% over the past year, whereas household incomes have risen by just 1.5%.
High street banks are at risk of entering a ‘spiral of complacency’ during a period of good economic performance and low loan issues, the BoE also suggested.
It warned that as the spiral continues, borrowers risk accumulating ‘more and more’ debt.
The BoE stated that it may urge banks to implement further safeguards against the risk of bad debts.
Commenting on the rise in personal debt, Alex Brazier, Financial Stability Director at the BoE, said: ‘Household debt – like most things that are good in moderation – can be dangerous in excess. Dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy.’