Household debt is heading back to pre-crash levels

SOURCE DAILY MAIL: Families splashing out on credit cards drives household debt back to pre-crash high of £40BILLION

The shock figures, buried in the latest forecasts by the Office for Budget Responsibility (OBR), reveal that families are set to spend £40 billion more than they earn this year. The OBR, which produces independent forecasts for the Treasury, suggests this figure will soar to almost £50 billion a year by 2020 as consumers carry on spending. After years of austerity, during which time many families cut their spending and paid down their debts, household debt level are now on course to return to record levels. The OBR forecasts that household debt will reach 163 per cent of incomes by 2020 – close to the 168.2 per cent recorded in the first quarter of 2008. Labour, which uncovered the figures, last night said ‘alarm bells should be ringing’. The new figures reveal how households tightened their belts in the wake of the financial crisis. In the depths of the crisis in 2009/10, families spent £67 billion less than they earned as they moved to cut their debts. As the recovery took hold, families gradually started spending again so that by 2013/4, spending exceeded borrowing by £12.4 billion, and has remained in the red ever since. The latest figures also show that interest payments on the debts racked up by families will rise by almost £6 billion a year by 2020 – raising fears about whether some will be able to make repayments.

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