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Debt - Economist issues warning for borrowers - 20/02/2008

A gloomy consumer forecast for 2008 has been made by a top economist.

Speaking to North Staffordshire's chamber of commerce, Kate Barker said that the economy would slow across the year.

Ms Barker is a member of the Bank of England's Monetary Policy Committee (MPC), a nine-member panel which meets each month to set the base interest rate.

She said that homeowners, beset by rising bills and mortgage repayments in the wake of the credit crunch, would face a "significant" downturn in personal finances.

This could tip many into debt - and personal loans and other borrowing could also become more difficult to secure.

Ms Barker commented: "If credit tightening were to prove more severe than in the MPC's present central projection, leading to a significant fall in lending to households and companies, this could prompt a further decline in property values."

According to figures from charity credit action, the current level of personal debt in the UK is approaching £1.4 trillion.

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