UK interest rates would have to roughly double for the country's personal debt levels to cause an early 1990s-style financial crisis, says lender Alliance & Leicester.
Figures it has published suggest household debt soared to almost £1.2trn by the end of 2005 from £337bn in 1990. Mortgage borrowing has increased to £967bn, and unsecured borrowing has hit £135bn – not including credit card spend. However, over the period average mortgage interest payments have hardly changed – averaging about £4,500 annually - while household income has doubled. It would therefore require an increase in the base rate to about 8.5%, taking mortgage rates to 10%, before a credit-crunch of the type that took place in 1990s were to occur again. In that year, A&L’s figu...
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