Forum Brief: Borrowing levels

The governor of the Bank of England advised British families not to "borrow in haste and repay at leisure" when he appeared before the Treasury select committee on Thursday following figures showing a further rise in consumer debt.

Malcolm Bruce MP, Liberal Democrat trade and industry spokesman, said: "These disturbing lending figures show how seriously people are exposing themselves to further rises in interest rates.

"Much of this lending is underpinning the consumer and housing boom, and with manufacturing still in recession, the Bank of England now has a serious problem.

"All this money will have to be paid back. While retailers may see a Christmas bonanza, if rates rise further, it will not be long before those borrowing at the edge of there means will find themselves in repayment difficulties.

"If this runaway lending continues, and unsustainable personal debt keeps growing, the bailiffs are set to reap a bitter harvest."

Forum response: Council of Mortgage Lenders

Michael Coogan, director general at the Council of Mortgage Lenders, told ePolitix.com: "Lending levels continue to confound expectations. We expect the recent resurgence in the housing market to result in high lending levels in November too, as people try to complete their moves before Christmas.

"The November rise in interest rates means that mortgage payments have risen for people with variable rates. Although further rate rises are not guaranteed, they seem likely, and consumers should borrow with caution.

"With Christmas just a month away the temptation may be to spend and borrow, but we would urge consumers to tread carefully as they may well face higher mortgage costs next year."

Forum Response: Institute of Directors

Graeme Leach, chief economist at the Institute of Directors, told ePolitix.com: "The Bank of England has finally run out of patience with UK consumers.

"Having waited patiently for UK households to bring their borrowing under control, it has finally decided to intervene. The price of doing nothing was deemed to be too great. With the ripple effect of stronger house prices extending north across the country, continued rapid growth in mortgage equity withdrawal seemed inevitable."