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Tell clients to rein in debts, Lloyds chief economist tells planners


Advisers should tell clients to rein in their personal and corporate debts in anticipation of a potential interest rate rise and uplift in inflation, chief economist at Lloyds Bank Trevor Williams has said.

Speaking at a Personal Finance Society conference in London yesterday, Williams said that a cautious economic outlook meant that debt servicing should be a key priority for those involved in the advice profession.

Williams said: “Public sector debt, that’s going to go up. Are households really prepared? At the moment that’s sustainable, it’s not excessively high. But we are at a turning point. We are now beginning to get more indebted. That’s the point. Household balance sheets are now beginning to go back up again, become more stretched…Saving rates are going to remain low.”

“Defaults are beginning to edge up because borrowing is beginning to go up. They are very low but they are beginning to go up and we need to be wary.”

“Debt servicing is a weak area. If interest rates go up from 0.25 we have a problem given the high level of debt that there is. Personal insolvencies are beginning to turn up because we are borrowing more and therefore the riskyness is beginning to increase.”

Williams also said that planners should warn clients that their finances may become less stable over the coming years and make sure they are in a position to pay off debts.

Williams said: “Debt servicing pressure is what we have to keep focused on from a personal finance perspective. How much debt have you got in total, whats your ability to service this debt, in particular in the context of an increase in interest rates in the years ahead as inflation increases and erodes the real value of your income. That’s the risk we face.”

“This is the time for you to be very cautious and to tell those people you talk to about their personal finance position that its likely to get more vulnerable over the next few years and ensuring they have the ability to pay any debts that they have. If you are advising lenders they too should be cautious about ensuring people don’t over-borrow.”



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There is one comment at the moment, we would love to hear your opinion too.

  1. Hallelujah! With all due modesty, haven’t I been saying this for ages. Today we see what our wonderful growth rate is based upon – “Borrowing rises at the fastest pace in a decade”. (Today’s headline) As ever people going shopping and spending what they don’t have.
    If the Government had any guts they would bring back credit control. Nothing on the card unless 25% is paid by debit card, cheque or in cash. No card allowed to go more than £5k un-cleared.

    I often presented a report (and charged for it) that merely advised reducing debt (including mortgages).

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