Mounting debt raises the spectre of the financial crisis

Blog Debt

The debt problems which overshadowed the economy prior to the last financial crisis are becoming noticeable once more, an MP has warned.

Rachel Reeves, who has just been appointed as the new chair of Parliament’s Business Select Committee, warned that mounting household debt posed a real threat.

A former member of the Shadow Cabinet, Ms Reeves is a trained economist and had worked at HBOS prior to entering the House of Commons seven years ago.

In an interview with Radio 4’s Today programme, she made clear that there were real risks attached to families “overextending” themselves.

“I do worry about the growth of some of those issues we saw in the mortgage market in 2008 now rearing their heads in unsecured lending and in car purchases,” said the Leeds West MP.

“We’ve got to be forever vigilant. We’re not going to have the same crisis as in 2008, but there are risks building up in the financial services sector as well as in household debt.”

Her comments come hard on the heels of a similar warning by the Bank of England’s Alex Brazier, who recently noted that personal loans had risen by 10 per cent over the course of 12 months and had now reached “dangerous” levels.

Threadneedle Street is understood to have grown increasingly alarmed about the relative ease with which people are borrowing, amid concerns that this could lead to a re-run of the problems which gripped the economy almost a decade ago.