BOE financial stability director Alex Brazier has been making some poignant observations 25 July
- rise in personal loans is dangerous
- outstanding car loans, credit card balance transfers and personal loans have increased by 10% over the past year
- in contrast household incomes have risen by just 1.5%
Brazier was making a speech last night to the University of Liverpool's Institute for Risk and Uncertainty and added that this increase in debt was:
"dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy".
He warned that High Street banks were at risk of entering "a spiral of complacency" about mounting consumer debt levels.
"Lending standards can go from responsible to reckless very quickly.
"The sorry fact is that as lenders think the risks they face are falling, the risks they - and the wider economy face - are actually growing,"
Brazier hinted that the Bank of England could force banks to take further safeguards against the risk of bad debts if it was deemed necessary.
Last month, the Old Lady told banks to shore up their defences against the risk of bad loans to the tune of £11.4bn in the next 18 months in case future economic shocks meant some borrowers could not keep up their repayments.
Brazier said by September the Bank will have assessed whether the rapid growth in consumer lending "has created any small gap in the line".
"If it has, we'll plug it,"
I have long highlighted the precarious levels of household debt in the UK as being one very good reason for not hiking rates. Brazier's comments would tend to support that view.
BBC has more background here
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E's Brazier - Reasons to be concerned on UK consumer borrowing
