BoE makes fresh warning on risks from consumer debt

The latest Financial Stability report from the Bank of England warns that banks are at risk from the ever-increasing levels of (mainly unsecured) consumer debt.

The Financial Policy Committee (FPC) has warned of "a pocket of risk in the rapid growth of consumer credit." More here from the Guardian. Consumer debt has been growing much faster than incomes and millions of people are at risk of an increase in interest rates. Unsecured loans to buy cars is a significant part of the problem.

Although consumer credit accounts for only around 10% of total household debt in the UK, the FPC minute states that:

"In the first three years of that severe stress test scenario, the UK banking system would, in aggregate, incur UK consumer credit losses of around £30 billion, or 20% of UK consumer credit loans."