British Give Americans Run For Their Money in Debt
Mortgage market turmoil. A painful housing slump. Economic concerns don’t get any worse than they are these days in America, right?
Wrong. Try coming to Britain. After a decade of unprecedented economic growth, this nation of perhaps the world’s most overextended borrowers might finally be forced to pay the piper.
High debt “really snuck up on me without me realizing how bad things were getting,” said Erire Obano, 40, a songwriter who had to sell her London home this month after she re-mortgaged her property - twice - in order to pay her rising debts.
She fell behind on mortgage payments that rose from $1,200 a month five years ago to $4,000 a month.
Today, British consumers owe $2.7 trillion on credit cards, mortgages and other consumer loans - more than the value of all the goods and services produced by its economy in a year, according to accountancy firm Grant Thornton.
“Personal debt exceeding Britain’s GDP is a worrying milestone in our buy-now-and-pay-later culture,” said Martin Bamford, a personal finance adviser and author in Surrey, England.
Indeed, personal debt in Britain is growing by $1 million every two minutes, according to www.creditaction.org.uk, a non-profit financial education group. The average household now owes an amount equal to 166 percent of its annual disposable income, 30 percent higher than in the U.S.
Debt worries were not very evident here over the past decade of economic euphoria. As home prices tripled, with the average house price recently smashing through the $600,000 mark in London, owners borrowed against that value to fuel consumer spending.
Then the collapse of the subprime mortgage market in the U.S. sent ripples around the world.
Meanwhile, there are indications that homeowners are starting to buckle under the squeeze of five consecutive interest-rate hikes to 5.75 percent, in the past year.
The number of people declaring bankruptcy jumped 28 percent in the 12 months ended in June, while the number of home repossessions soared 30 percent.
“Some people have inevitably been pushed over the edge with bankruptcy or insolvency, an increasingly common route for many,” said Sean Gardner, chief executive of financial Web site www.MoneyExpert.com. “But that’s the tip of the iceberg really. The statistics hide millions of people whose finances are at the breaking point.”