The British Are Sinking

In a nationwide spending spree powered by easily obtainable credit, consumer debt – including personal and mortgage debt – has grown at 9.5 percent a year and now stands north of $2.6 trillion dollars.

No, I am not describing the U.S. but our English friends across the Atlantic. It would appear the desire for “stuff,” and the willingness to go into debt for it, isn’t a wholly American phenomenon.

With the average UK adult now owing $68,000 US dollars compared with $35,000 just seven years ago, the credit crunch and its impact on the banking industry still stands to cause as many headaches abroad as it has here in the U.S.

As lost profits due to charge-offs in the UK credit card market now amount to more than $8.2 billion and 1.4 million homeowners near the end of their fixed-rate mortgage term, this near doubling of the average debt load hasn’t gone unnoticed.

As unpalatable as loses are, increased debt and spending make them inevitable. And with some of the largest banks and debt sellers in the UK – including HSBC, Barclay and Royal Bank of Scotland – expecting to disclose unfavorable fourth quarter loses, interesting opportunities should present themselves to the ARM industry.