Families are drowning in debt after a decade-long binge on credit cards.
The Bank of England today warns lenders are writing off record quantities of credit card borrowings as thousands of individuals spiral into insolvency.
Lenders are responding by pushing up interest rates even higher, putting more families in financial trouble, the Bank said in its Financial Stability Report.
However, families are saving more money than they are borrowing for the first time in more than 20 years, according to a Bank of England report.
Last year £24billion went into deposit accounts while £20billion came out in new loans.
It is the first time since 1988, when records began, that savings have overtaken new borrowing.
Economists said households had become increasingly concerned about paying their debts following the recent recession.
The findings are backed up by separate research which today warns of a looming ‘insolvency crisis’ in the UK.
A record 146,948 Britons will be made insolvent in England and Wales this year, up 10 per cent on 2009, according to a ComRes survey for insolvency practitioners group R3.
Steven Law, president of R3, said: ‘We stand on the brink of a personal insolvency crisis that will take years to work through the system.
‘We know there are nearly a million people out there who are struggling with their debt.
‘While it may be the case that these problems are resolved without help, there is a risk that they might snowball out of control.’
Britain is now by some measures the most indebted country in the world, the coalition’s Budget said this week.
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