Household debt highest in 10 years, say Lib Dems

Households are paying more of their income servicing their debts than at any point in the last decade, the Liberal Democrats Party warns.

The party says personal debt, as a proportion of income, has risen from 105% in 1997 to 164% last year, the highest ever recorded and the highest in the developed world.

And the cost of families servicing their interest has risen to 9% of a household’s disposable income, and total debt servicing is more than double that.

It estimates the total amount of interest paid on loans is equivalent to the entire Gross Domestic Product of the Czech Republic.

The Liberal Democrat Party has called on new leader of the Labour Party Gordon Brown to make it one of his first priorities as Prime Minister to urgently tackle rising levels of personal debt.

Vince Cable MP, shadow chancellor for the Liberal Democrats, says: “Gordon Brown will move house this week while thousands of home owners face severe financial difficulties because of the expected interest rate rises this summer and later this year.

“Families are now spending more money servicing their debt than at any point in the last decade. When rates rise as expected this summer and probably in the autumn too, many households will not be able to cope.

“As chancellor, Gordon Brown neglected to tackle this ticking time bomb and we are already seeing rising numbers of repossessions and personal bankruptcies.

“As Prime Minister, he must take urgent action to tackle spiraling levels of personal debt before more families find themselves on the street.”