Personal debt increases

Over 8 million British adults are in serious debt and over 2 million are struggling with repayments. 18% of adults in Britain are in £10,000 or more of unsecured debt such as credit cards, overdrafts, loans and store cards .The number of bankruptcies rose by 10 per cent in the first quarter of 2007 compared with the same period in 2006. Around 420,000 people were prosecuted for defaulting on loan repayments in the first six months of this year - up eight per cent on 2006. Scotland was revealed as the area with the highest proportion of indebted residents .

The Bank of England has raised the cost of borrowing five times in the past year to 5.75 percent -- the highest level in six years. Analysts expect another rise to 6 percent by the year end . High levels of unsecured debt are clearly linked to the rise in interest rates over the last 12 months . The record rise in house prices -- especially in London and the south-east -- has led to a growing discrepancy between mortgage payments and salaries. The high pressure to maintain social and commercial status often goes hand in hand with high expenditure on the high street. Borrowers affected by the higher interest rates now are storing up debt problems for the future; instead of making cuts in their personal expenditure, they are taking on further unsecured loans and credit cards .

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