Published On: Sun, Jul 16th, 2017

The credit bubble only seems to blow larger and larger, says HARVEY JONES

The decision by the Bank of England and other central bankers to slash interest rates to near zero after the financial crisis may have averted financial meltdown, but only by triggering another debt binge.

British household debt recently soared to a record high of more than £1.5trillion, after growing at the fastest pace since before the credit crunch, according to The Money Charity.

The Bank of England is now forcing banks to strengthen their financial position by another £11.4billion in the face of rapid growth in borrowing on credit cards, car finance and personal loans, up another 10 per cent over the last year.

Record low mortgage rates have also driven house prices to dizzying highs.

The average UK property now costs 7.6 times earnings, more than double the figure 20 years ago, squeezing the next generation off the property ladder.

The problem is getting more acute as rising inflation is pushing the Bank ever closer to hiking base rates for the first time in a decade.

It needs to do something to deter yet more borrowing, and to offer some hope for hard-pressed savers. Its dilemma is that higher borrowing costs could finally prick the consumer debt bubble it has helped to create.

The Bank is trapped between rock-bottom rates and a hard place. So are the rest of us.

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