News at the start of October 2006 provided some shocking numbers about the state of personal finances in the UK.

The average Briton owes '3,175 in unsecured debt. The European average however is just '1,588. This means that the average Briton is now in twice as much debt. Should we be concerned about this?

In 2005, Europeans borrowed around '600 billion of unsecured lending, but the UK share of that was '215 billion. The average 18 to 24 year old owes '2,860 but many have debts of over '5,000.

In part, this can be blamed on the super competitive financial services industry. In a bid to compete, personal loans, store cards and credit cards are easier to obtain and the interest rates charged are more competitive. This price war is intense between providers and consumers have literally 'filled their boots'. There are now more credit cards in the UK than there are people! Yet in France, credit card borrowing accounts for just 1.6% of lending.

If mortgages are included, the debt levels rise substantially. The mortgage market is equally competitive and a combination of historic low interest rates, lenders fighting for business and rising house prices has enabled individuals to borrow ever more. It is now believed that the average borrower spends 51% of his monthly income on mortgage repayments.

Sooner or later this debt will need to be repaid. This may seem obvious, but it isn't always that clear to borrowers who are over spending.

As costs rise generally, borrowers are facing a squeeze. Oil prices have been at record highs, inflation is rising and the Bank of England made a surprise increase in interest rates in August to 4.75%. The average fuel bill in the UK has risen by 30% in a year. As you may be aware, wages are not generally rising that fast. Factors like these will have an impact on household budgets. The only real question is when will the damage be felt?

Bankruptcies and missed mortgage payments are starting to increase in number which is a sign of things to come. The citizens Advice Bureau recently announced that they believed that 770,000 mortgage borrowers had missed one or more monthly repayments in the last year.

Should borrowers begin to do the sensible things and cut their borrowing and rebuild their savings, economic growth may be threatened. This may have an impact on house prices, consumer spending, tax revenues and much more.