UK Debt Panic

With the latest figures on the increase of personal debt in the UK, some sectors are starting to panic at the numbers. However, one must look at the big picture to get an idea of what the fuss is all about. If you take any part of a whole, it can look like the whole is something other than what it is. But if you factor in the other elements, average housing prices, incomes, council taxes, and retail prices, which are all at record levels and continue to rise, then you can see that the debt is following everything else. The average house price in the UK is £158,000, and the average debt is £71k, which seems to be a rather ordinary amount.

If lenders are concerned that the debt has gotten too high, then why do they keep giving out loans? Because there is a belief that they will be repaid by the borrower as lenders do not give out money they do not expect to get back. Lenders look over all of the details and then come up with a loan package that will be right for their borrower. But not all of the responsibility lies in the hands of the lenders; borrowers need to be financially responsible as well.  ■