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Study predicts family debt increase

Tuesday July 16th 2013

Families will be left with potentially dangerous levels of debt if interest rates rise at predicted levels, according to a new study.

Research by the Resolution Foundation think tank suggests that more than 800,000 families in the UK will be spending half of their income on debt repayments by 2017 as interest rates rise and household budgets continue to be put under pressure.

Interest rates are predicted to rise by 1.9% in four years, but the study also took into account the possibility that the rate could increase by a further 2% by 2017.

If interest rates rise but family household income growth is strong, some 700,000 would be spending more than half their income on repayments. But if household income growth is weak, the figure would be over 800,000.

Matthew Whittaker, senior economist at the Resolution Foundation, said: "There is now the real prospect that a large number of households already burdened with debt could collapse under its weight if economic conditions tighten.

"Even if interest rates stay in line with expectations, we are likely to see a rise in the number of families struggling with heavy levels of repayment over the coming years."

Copyright Press Association 2013

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