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MONEY COMMENT
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Who is to blame for Britain's rising debt problem? Could it be our high street banks that have tempted us to borrow more by relaxing their lending rules? Or is it the Bank of England, which has enticed us to spend extravagantly by cutting interest rates nine times between December 2000 and July 2003? Both The Old Lady of Threadneedle Street and our high street lenders are culpable, but the real culprits are us! Let's face it. No one forced us to take out bigger mortgages from our banks. Nor did anyone push us into spending more than we can afford on our bits of plastic. We got ourselves into this mess, and that problem could get considerably worse unless we do something about it now! According to the Bank of England's latest Financial Stability Review, the ratio of household debt to income has climbed from below 100% in 1997 to around 135%. Today, the Bank said total lending to individuals grew by a further £10 billion in May to a total of £993 billion. Next month's data is expected to show household debt bursting through the £1 trillion barrier. The Bank of England has repeatedly warned of the risks from our carefree attitude towards borrowing, saying the high level of debt-to-income amongst UK households increases our exposure to any unexpected rise in interest rates or falls in income. Further rate rises are widely expected over the next several months, which the Bank thinks will be a "considerable challenge". The Bank of England has fired its warning salvo, and it is now time for us to take heed if we are to avoid future financial anguish. There is still time to act if we are to avert impending money misery, but we must act quickly. Simply hoping that interest rates won't rise too much is not a sensible option. Start by using any savings you may have to pay down expensive debts. Remember it is pointless keeping too much surplus money in a savings account if you are also servicing debt at a higher rate of interest. If you do not have savings to fall back on, then you could switch whatever credit card debts you may have to one of the many 0% cards that are still available. For more advice on ditching your debts, visit our Get Out Of Debt Centre.