Moody’s credit ratings agency has raise concern over the increasing levels of UK Consumer Debt, saying that it believes that this will leave the UK economy more vulnerable to future shocks within the global financial system.
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The report from Moody’s found that unsecured lending, which includes the likes of credit cards and personal loans, have increased some 7% year-on-year since December 2012, something that the firm says was particularly worrying considering the decline in savings and wages seen in the UK over the same period.
“Consumer spending has surpassed pre-crisis levels, at a time when growth in unsecured consumer debt is outstripping wage growth,” Greg O’Reilly, assistant vice president at Moody’s, said in the report.”
“Low Interest Rates are hiding the risk to consumers, making consumer debt appear more affordable on the surface, but masking potentially negative long-term consequences.”
A number of BoE officials have hinted over the past few weeks that they may be preparing themselves to raise interest rates from their current 0.5% low, a move which would significantly increase the cost of borrowing for UK consumers.
BoE governor Mark Carney told the treasury select committee earlier this week that the time for an increase in interest rates was drawing closer. He added that households should take steps to begin planning their finances with a future interest Rate Hike in mind.
In addition to, and echoing Mark Carney’s comments, chair of the Federal Reserve Janet Yellen said that US interest rates are likely to rise this year, with analysts expecting an increase in UK rates to following within a few months of a US rate Hike.
Analysts for Unicredit and Dankse Bank are predicting that a rate hike will occur in November of this year, whilst numerous other analysts have revised their forecasts, which up until now expected any rate hike to happen closer to the second quarter of 2016.
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