By Max Clarke
UK household debt is set to climb yet further, hitting 175% of disposable incomes by 2015.
Consumption, the Office for Budget Responsibility predict, is forecast to continue to increase at a faster rate than wage growth, as a result of long-term above-target inflation.
Though wage growth will continue to increase, it will be outstripped by growth in expenditure as families attempt to maintain their standards of living. Consumables, the OBR’s latest debt report notes, have the double impact of absorbing household’s expenditure without adding to their underlying physical or financial assets, exacerbating this growth in the level of debt.
The quoted figure- 175% of household’s incomes- has been revised up since the OBR’s previous report on account of the higher than anticipated inflation, itself buoyed by spiking global commodity prices and soaring energy costs.
Furthermore, though debt is rising, credit remains scarce. Though the situation has increased since 2010, and will continue to do so, a subdued housing market is limiting the growth of asset- based collateral for borrowers.
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