Debt needs to be managed to prevent another crash – Hersch

Now, more than ever in recent times, data may reinterpret the past, but the past does not necessarily give an indication of what the future holds.

What I find worrying is that past promises of balanced budgets have gone by the by, and both national and consumer debt continues to grow.

Consumption growth has slowed to a lesser degree than that of incomes, with a corresponding decline in household’s rate of saving.

Interest rates on deposits have not kept pace with increases in rates on debt, which is also a disincentive to save, as is rumours of changes to pension rules.

Despite a moderate increase in the bank rate to 0.75%, it is expected to remain below 1.5% for the next three years.

This does not give much scope for relaxation should that be necessary to stimulate the economy.

The country’s total debt is projected to reach £6.7trn by 2023, with households accounting for £2.6trn of that, a larger share than both the government and non-financial companies, according to recent analysis by PWC.

It compares with £5.1trn of total debt last year, when household debt stood at £1.9trn.

The country needs to be aware of the risks and plan to reduce these costs.

Debt is the elephant in the room and it needs to be managed, to minimise the risk of yet another crash.

Indiscriminate debt increases are unhelpful, to say the least, but responsible lending can facilitate long-term growth.

UK consumers are confident, but this confidence has an element of nationalist bravado in it.

Unless our institutions plan for a difficult future, this confidence will evaporate.

Firms need to invest in people, to ensure that the skills shortage is reduced and productivity increases.

They also need to invest in technology, so that skilled people have reliable data to work with and also that information-gathering needs to be improved.

This applies as much in the mortgage industry as elsewhere.

Skilled people, both at lenders and intermediaries, can assess data better and apply conclusions both to the benefit of their firms and to the consumer, to ensure that better outcomes are available for all.