debt rising

Research contradicts comments made by Lord Young, the Tory peer who resigned as an adviser to David Cameron after saying "the vast majority of people in the country today have never had it so good" since the Bank slashed rates to 0.5pc.A study, conducted by NMG Financial Services Consulting for the Bank of England , shows that almost half of all households are concerned about their debt – largely because soaring credit card rates are eroding savings from lower mortgage costs. Rates on credit cards have risen from 17.8pc in November 2007 to 18.7pc, according to the Bank, despite a cut in base rates from 5.75pc to 0.5pc.

In addition, NMG notes that 48pc of all households are on fixed-rate mortgages, "paying about £680 a month in comparison with about £530 a month for those on trackers or variable rates" for equivalent sized mortgages. Households with high loan-to-value (LTV) mortgages or renting are struggling the most, the survey says, with the proportion resorting to credit card debt rising: The fraction of high LTV mortgagors with unsecured debt had risen between the 2009 and 2010 surveys, from 68pc to 92pc.

Despite record low interest rates, half of respondents reported a fall in monthly disposable income after tax, mortgage, rent, bills and other loan payments. Nearly a third, 29pc, said their debt concerns had risen over the past two years, compared with just 12pc who are now less worried

UK consumer borrowings are around £1.45 trillion and have not begun to shrink. The Bank has already warned that more than one in two people with "unsecured" debts, such as credit cards or personal loans, are struggling to cope.