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Bank of England warns of increased loan defaults

When the Bank of England gets involved with official comments about loan default numbers on the rise it really is time to worry. However, this is just what happened today with the Bank warning that rising loan defaults were pushing consumers further and further into debt and leaving less and less money for the economy.

There has also been a sharp downturn in house prices as more and more home owners look to sell for drastically reduced prices to take some pressure off their own finances and buyers push prices ever lower. We are literally in something of a vicious circle with regards to house prices in the UK, consumer debt and mortgage defaults. The more debts build up the more pressure on house prices and the less money there is available to refloat the economy via the consumer route. There is also another concern in the UK, the state of the public purse which is approaching debts of £50 billion for this year (although overall debt for the UK is in the region of £500 billion).

The government has very little room for manoeuvre which is starting to cause concern in investment markets. Knowing that any rescue package will be covered by debt has seen many in the market rushing for the exit door as Gordon Brown and the government look set to literally mortgage the whole of the UK!

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