Is £200bn debt bubble on brink of bursting?

banks have reported a surge in unpaid debts as fears grow that britain’s £200billion credit bubble is finally about to burst.

Lenders have seen a jump in the number of customers unable to repay what they have borrowed through credit cards and personal loans.

Campaigners and MPs said the figures – disclosed in a bank of England survey – were deeply concerning.

Labour MP John Mann, a member of the Treasury select Committee, said: ‘It’s time for policymakers to give unsecured debt the attention it deserves. stagnant real wages over recent years have meant many households have looked to credit cards and car loans to maintain their standard of living.

‘I warned the bank of England about their dangers in October.

‘back in 2008, early mortgage defaults were the first warning signs: I hope this survey evidence will lead to real action being taken to make sure that consumers and the wider economy don’t suffer from the bursting of another bubble.’

Justin Modray, of consumer group Candid Money, said: ‘This suggests the tide could be turning.

‘People have been borrowing more than they can afford to pay back and it was bound to go wrong.’

britons now owe £205.8billion on cards, personal loans, car finance and overdrafts – the highest figure since the financial crisis.

This has been rising since 2012, fuelled by ultra-low interest rates and a price war between lenders. It has sparked concern at the bank of England, which warned in september that consumer credit is a ‘pocket of risk’ in the economy.

The bank added that banks’ losses from consumer credit could hit £30billion in a protracted economic downturn.

Its officials warned that some lenders had become complacent, and sent out letters urging them to be more careful.

The survey released yesterday shows banks cut back on credit card and other non-mortgage lending in the last three months of 2017, meaning they reduced the amount on offer every quarter last year.

significant cuts are expected in the three months to March 31.

banks also said they have tightened rules around personal loans so it is harder to borrow, and expect to tighten them again.

They have also slashed introductory offers on credit cards after criticism from the bank of England.

Consumers seem to be getting the message, with demand for personal loans and car finance falling for the first time since the end of 2015, although credit cards were as popular as ever.

but banks’ efforts to keep a lid on the problem failed to stop a rise in defaults on unsecured lending, which climbed in the fourth quarter as people were unable to pay back what they owe.

banks are braced for further rises and said that the problem was worst in credit cards.

britain’s household debt has long been a cause for concern. borrowers’ behaviour is closely watched for signs of what is happening in the wider economy, with a lasting rise in defaults often linked to downturns.

‘Suggests the tide could be turning’