COMMENT
Britain Is Drowning In Debt

Britain's borrowers certainly were extra-keen in 2004!

We increased our total mortgage debt by £101 billion last year, which is greater than total net mortgage lending in the five years from 1994 to 1998 combined, at £99bn. It's also the largest single-year increase in debt since the Bank of England was founded in 1694. Yikes!

Of course, soaring house prices have forced homebuyers to dig deeper to buy their nests, which is at least partly understandable. However, we also increased our unsecured debt (made up of personal loans, credit and store cards, overdrafts and so on) by a hefty £15bn last year. This is largely because, as a nation, we are spending £110 for every £100 that we earn. Oops!

Thus, we start 2005 with £116bn more debt than we had at the beginning of 2004, an increase of an eighth (12%). And did wages rise by 12% last year? In fact, they rose by about 4%, which means that, yet again, life becomes a little less affordable from one year to the next.

For the record, our mortgage debt is now almost £875bn and our other debt is close to £184bn, making a total of £1,058bn (the difference is due to rounding). So, since we hit the much-discussed trillion-pound mark in June, we've continued to increase our debt burden by almost £10bn a month.

Surely our insatiable appetite for debt will become a major worry, not least because the annual interest bill on this £116bn of new debt alone comes to roughly £7bn. How is your household budget coping with your increased borrowing costs? In the not-too-distant future, our credit culture is certain to claim millions of victims. "Generation X" is history; say hello to Generation DBD (Damned By Debt)!

Ignore house prices and other financial flim-flam that make you feel good, because these are far less damaging than the concrete reality of debt, which must be paid off eventually. As a former credit junkie, I can confirm that getting out of debt is one of the greatest feelings imaginable. The thrill of moving from paying interest to earning it is unforgettable!

Don't let debt destroy your dreams. Read our Getting Out of Debt handbook and visit our Get Out of Debt centre today!

More: Quiz: Are You A Credit Addict? | Pay Off Your Mortgage In Five Years.