The Bank of England (BoE) has reported a sharp rise in the number of personal loans, adding to its previous warnings that consumer debt is posing a significant danger to the UK economy.
It said outstanding car loans, credit card balance transfers, and personal loans have increased by 10 per cent over the past 12 months.
The BoE’s financial stability director Alex Brazier suggested that action is needed, hinting that the Bank could force lenders to take further safeguards against the risk of bad debt.
“Household debt – like most things that are good in moderation – can be dangerous in excess,” he said.
He added that the increase in debt was dangerous to borrowers, lenders, and everyone else involved in the economy.
Mr Brazier also criticised high street banks, which are at risk of entering “a spiral of complacency” about growing consumer debt levels.
“Lending standards can go from responsible to reckless very quickly.
“The sorry fact is that as lenders think the risks they face are falling, the risks they – and the wider economy face – are actually growing,” he said.
Prior to the announcement, the BoE warned lenders to bolster their finances against the risk of another financial crisis.