Britain's debt mountain of £10,000bn represents a "time bomb" for families, who face a loss of as much as £2,700 a year each if interest rates return to more normal levels, according to analysis by accountants PriceWaterhouseCoopers.
In relation to the national income, debt is now at historically high levels. Total UK debt – public and private – was 540 per cent of GDP at the end of 2009, up from 200 per cent of GDP in 1987, and is projected to reach a total of £10,000bn by 2015. By that time the national income will still be less than £2,000bn. The interest on the public national debt will be £63bn a year by 2014, according to the Treasury.
Should rates edge up over the next few years by 2 per cent, says PWC, family incomes could drop by £1,800 a year; a rise of 3 per cent would see the loss rise to £2,700, or about £50 a week. Before the recession, rates stood at 5 per cent. After years of rising taxation and small, if any, increases in pay, such a rise in the cost of servicing mortgages, loans and overdrafts will be difficult to bear for many families.
John Hawksworth, chief economist at PwC, said: "Low interest rates will not last for ever."Reuse content