UK debt exceeds £1 trillion

Research from accountants Grant Thornton has revealed that the total amount owed by consumers through mortgages, loans and credit cards increased by 7.3% during the six months to 30 June to stand at £1.444 trillion.

However, during the same six-month period, Gross Domestic Product (GDP) only rose by 5.1% in nominal terms to £1.41 trillion, meaning personal debt exceeds the income generated by the country as a whole.

However, according to Stephen Gifford, Grant Thornton’s chief economist, consumers need not panic as personal debt is covered by the UK housing stock but the figures highlight the growing problem of personal debt levels in the UK.

Mr Gifford adds, though, if the property market and economy continue to slow, the current levels of personal debt will become unsustainable and there will be a significant increase in personal insolvencies.

In the last decade, the amount of people declared insolvent has increased from an average of 24,000 a year in 1997 to over 100,000 a year in 2007.

The latest figures show that during the first half of 2008, 49,607 people have been declared insolvent and Grant Thorton is forecasting that the total number for this year could exceed the 100,000 mark.

In related news, research this week from GE Money established that over three million borrowers have had a mortgage or a loan rejected at least once in the last 18 months.

The tightening of lending criteria has meant that even those with a good credit history are finding it increasingly difficult to obtain credit.

The figures from GE Money illustrate that the days of obtaining cheap credit are over so British consumers already struggling with debt will undoubtedly suffer as a result.

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