Debt costs 'reach record levels'

The burden of paying off household debts has reached record levels, a leading firm of accountants has said.
PricewaterhouseCoopers says repaying money borrowed, and the interest on it, now takes up 19% of the average UK household's disposable income.

That is more than the previous peak of the domestic debt burden, which was 18% of household income in late 1990.

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After the party

Hundreds of thousands of graduates will celebrate finishing university this month, but the Student Loans Company rather rained on their parade this week by reporting that debts soared by more than £3bn last year.

The introduction of annual tuition fees up to £3,000 last September pushed the total owed by current and former students in England and Wales to the Student Loans Company to an eye-watering £19bn. This does not include other debts run up with banks, parents and elsewhere.

Students graduating last summer were saddled with an average total debt of just over £13,250 per head, according to the NatWest Student Money Matters Survey, while the National Union of Students estimates that those graduating in 2009 will owe an average of around £30,000.

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Governor issues 'toxic' debt warning

The Bank of England Governor has warned the City that an explosive rise in lax loans and complex debt instruments now represents a major threat to global financial stability.

In a remarkable speech at the Mansion House last night, Mervyn King issued a caution to the corporate debt market, where banks have dramatically loosened their lending conditions and devised ever more advanced means of extending cash to customers.

He singled out collateralised debt obligations (CDOs) as a specific threat, warning those trading in these complex products that they may be dicing with risks "which we do not understand with any great precision".

He said: "The risk of the entire return being wiped out can be much greater than on simpler instruments. Higher returns come at the expense of higher risk."

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Debt judgments hit 10-year high

The number of County Court Judgments (CCJs) against consumer debtors has reached its highest level in almost 10 years, figures show.
Nearly 250,000 CCJs were issued in England and Wales in the first three months of 2007 - up 9.5% on the same period a year ago.

Lenders were "increasingly using the court route to deal with unsecured debts", the Registry Trust said.

Experts said the data also showed more households were struggling financially.

The 247,187 CCJs issued for consumer debt is the highest since the summer of 1997

The total number of judgements issued - including those served on businesses - was 296,841, up 9.1%.

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