Debt warning as amount of cash owed by families grows at fastest rate in 11 years

FAMILIES are taking out credit at the fastest rate since January 2005 – two years before the financial crash.

Brits now owe more than £190 billion in credit cards, loans and overdrafts.

The average debt per household, excluding mortgages has spiralled to £7,300 and Visa says Brits splashed £2billion on their cards.

The Bank of England said that last month £572 million was added to outstanding credit card bills.

Consumers face being buried under debts they have no prospect of paying off.

Baroness Altmann, consumer champion and former pensions minister, told the : “My worry is we are repeating the mistakes of the past.

“Excessive borrowing caused the financial crisis, which caused years of misery. Nothing has been done to address the problem of household debt – and it is rising again.

“Banks and other financial institutions have been very good at luring customers into borrowing more by offering teaser rates.

“I fear many households will be unable to meet their repayments when they finally rise, and they have less money left over each month after paying off their mortgage.”

The £572million added to credit card bills last month pushed the amount owed by consumers to £66.2billion – a record high.

Other lending – such as personal loans, overdrafts and car finance – rose by £1billion to £123.9billion as families took advantage of record low interest rates.

Gillian Guy of Citizens Advice said: “As consumer credit growth hits an 11-year high people could be at risk of getting trapped in a debt bubble.”

Credit card holders can rack up debt at low cost for an introductory period but are then hit with sky-high rates.

The average has risen to 23 per cent, according to Moneyfacts.

The Financial Conduct Authority (FCA) has launched a fresh investigation into rip-off rates. The move could lead to the introduction of price caps similar to those imposed on payday lenders in January last year.

The authority’s investigation will include high-cost credit cards, overdrafts, loans and car finance.

Andrew Bailey, chief executive of the FCA, said: “As an organisation, we have already taken many steps to address the risk of consumer harm by putting in place new rules for high-cost short-term credit firms and taking action against non-compliance across all credit markets.
“We have come up to the point of reviewing the cap on payday lending, making now the right time to take a broader view of the issues around high-cost credit, including unarranged overdrafts, and to consider whether our requirements remain appropriate.”

Mike O’Connor, chief executive of StepChange Debt Charity, said consumers are becoming trapped in cycles of debt and called for FCA to prevent the problems caused by people taking out multiple loans.

We pay for your stories! Do you have a story for The Sun Online news team? Email us at tips@the-sun.co.uk or call 0207 782 4368