Unsecured Debt Falls For The First Time In 16 Years

Tue, 31 Mar 2009

UK households are paying off debts on their loans and credit cards for the first time in 16 years, according to latest figures from the Bank of England .

The BoE data showed the nation’s level of unsecured debt (money owed on personal loans and credit cards) fell for the first time since April 1993, with debt repayments during February totalling £245 million.

The figure is more than what economists were expecting and further highlights how worried families are putting a cap on spending in an effort to cope with the economic recession .

Official figures released last week showed that consumer spending over the last three months was at its lowest for 30 years.

However, one economist warned that although repaying debt is the right step to take, if every borrower in the country did so, it would spell disaster for the economy.

Ben Read, economist at the think tank Centre for Economics and Business Research, explained that if no one is borrowing, it means no one is spending anything, which would ultimately lead to the economy grinding to a halt.

"For the long-term good of the economy there needs to be this big, structural shift to people saving more and borrowing less, but if everyone tightens their belt very quickly it will be painful," he said.
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