As of December 2007, total lending to households reached £1,409 billion. (UK GDP is about £1,375 billion, give or take a billion.)
This figure comprises of mortgage lending and consumer credit (mainly unsecured loans and credit card debt). Mortgages accounted for £1,185 billion while the remaining £224 billion consisted of consumer credit including credit cards. In May 1997, the comparable figures were £419 billion of mortgage debt and £84 billion of unsecured debt.
According to the Financial Services Authority, more than one million have fallen behind on interest payments, and another two million are “continually struggling”.
People are beginning to default on this debt, pushing the problem over to the banks. In 2006, UK banks wrote off an unprecedented £6.6 billion of loans to personal customers. That is 20 per cent higher than in 2005, which itself was 50 per cent higher than 2004.
Here is a frightening question; what happens to bank balance sheets if unemployment rises?