- 30
- May
The central bank said that the fear of a shock caused by global imbalances has diminished after growth accelerated in Europe and Japan and slowed in the U.S.
The bank’s assessment of the risk from consumer debt follows record bankruptcies exceeding 100,000 households in 2006. The ‘significant rise’ in loan defaults is due in part to tighter lending standards, but the bank’s lending to high-risk consumers such as teens and the elderly has also been blamed.
There were fears that an increase in bad debts and the greater mortgage burden carried by many UK households, combined with a crash in the US sub-prime lending market, and a short crash in the Chinese stock market, could all bring the UK economy crashing to the ground.
However, the strong UK economy, and continued lending of personal loans and mortgages, has buoyed the economy. This is good news for many consumers, as it lowers the risk that interest rates will grow beyond the newly predicted 7 per cent.
The housing market is feeding the UK economy and causing an anomaly that has many economists worried. The high level of expendable income invested on mortgages has had an adverse effect on the retail industry. This may trickle through all segments of the economy, creating a long-term slow down.
The UK economy has traditionally been more self sustaining than most economies by some standards, leaving many analysts and economists predicting that foreign problems will not pose a serious threat to the UK economy in the near future.
