Bank Warning Highlights Debt Consolidation Need
The Bank of England has warned that the UK's financial heart could be in trouble if the country's debt bubble bursts.
As much as £40 billion worth of profits could be wiped off balance sheets if a collapse in asset prices was to coincide with a sudden jump in borrowing rates. The news demonstrates the importance for people with large debts to use debt consolidation loans to help them out of financial difficulty, as not doing so is likely to push them further into trouble.
According to the bank, a sudden increase in borrowing rates would result in a two per cent fall in output, which could severely impact on the annual profits of banks. If such a jump in rates was to coincide with a drop in credit conditions outside the UK, the bank suggests that the British financial system could be in significant trouble. And it may only take a further surge in oil prices to push up borrowing rates in the UK as well as other parts of the world, it has been claimed.
"Such extreme scenarios could be sufficient to more than absorb the annual profits of the UK banking system and therefore cause some material erosion of capital," the bank's report warns.
The high level of debt in the UK would exacerbate any downturn in the economy and as borrowing rates may be forced upward, the ability for many to keep up with repayments would also be likely to slip. The UK's debt position is currently at an all-time high and as such the need for either debt consolidation loans or an IVA [http://www.debtsolver.co/uk] has never been greater.
While the bank's Financial Stability Review acknowledges that any such financial meltdown is unlikely, due to the various sets of circumstances which would need to come together, the risk is still there. And the report concluded that the majority of risks revolve around the UK's high level of debt, suggesting that while many consumers are now relaxed about being in debt, this is not a healthy position for the economy in the long-term.
The government has already launched a scheme to ensure that all young people learn about finances while in school, but this report from the bank is likely to see more calls for better financial education for older people who are already in debt or in danger of falling into debt. Using debt consolidation loans to ease the burden can help to make repayments easier and get people out of financial trouble.
A debt consolidation loan or an IVA could become a vital tool in the future as a way to not only reduce individual personal debt, but also to help reduce the threat of a financial meltdown across the UK.
As much as £40 billion worth of profits could be wiped off balance sheets if a collapse in asset prices was to coincide with a sudden jump in borrowing rates. The news demonstrates the importance for people with large debts to use debt consolidation loans to help them out of financial difficulty, as not doing so is likely to push them further into trouble.
According to the bank, a sudden increase in borrowing rates would result in a two per cent fall in output, which could severely impact on the annual profits of banks. If such a jump in rates was to coincide with a drop in credit conditions outside the UK, the bank suggests that the British financial system could be in significant trouble. And it may only take a further surge in oil prices to push up borrowing rates in the UK as well as other parts of the world, it has been claimed.
"Such extreme scenarios could be sufficient to more than absorb the annual profits of the UK banking system and therefore cause some material erosion of capital," the bank's report warns.
The high level of debt in the UK would exacerbate any downturn in the economy and as borrowing rates may be forced upward, the ability for many to keep up with repayments would also be likely to slip. The UK's debt position is currently at an all-time high and as such the need for either debt consolidation loans or an IVA [http://www.debtsolver.co/uk] has never been greater.
While the bank's Financial Stability Review acknowledges that any such financial meltdown is unlikely, due to the various sets of circumstances which would need to come together, the risk is still there. And the report concluded that the majority of risks revolve around the UK's high level of debt, suggesting that while many consumers are now relaxed about being in debt, this is not a healthy position for the economy in the long-term.
The government has already launched a scheme to ensure that all young people learn about finances while in school, but this report from the bank is likely to see more calls for better financial education for older people who are already in debt or in danger of falling into debt. Using debt consolidation loans to ease the burden can help to make repayments easier and get people out of financial trouble.
A debt consolidation loan or an IVA could become a vital tool in the future as a way to not only reduce individual personal debt, but also to help reduce the threat of a financial meltdown across the UK.
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