Families 'burying heads' over household debt
New research from independent think tank the Resolution Foundation suggests that if interest rates were to go up by two points - and if household incomes fail to grow - then the number of dangerously indebted households in the UK would double to 1.3m in the next four years.
The Bank of England has held interest rates at half a percent since March 2009. Dangerous debt levels are when people spend more than half their income on repayments.
Gillian Tett of the Financial Times told the Today programme's Evan Davis that "like any drug, many households, and in fact the government as a whole, have become addicted to this [low level of interest rates on debt]".
She said that it was important that households use this time "to adjust to the inevitable rise interest rates in the future" and not "bury their heads in the sand".
Sir John Gieve, former deputy governor of the Bank of England, agreed with Ms Tett but went on to say that "this is a problem of recovery... let's have the recovery, that will generally be good for most households and most incomes."
First broadcast on BBC Radio 4's Today programme on Thursday 11 July 2013.
- From the section UK