Now we owe £4,500 each

EVERY Briton now owes on average almost £4,500 - £1,000 more than at the same time last year, research has revealed.

Borrowing on credit cards, bank loans and overdrafts - as well as Christmas spending - has driven our personal debt crisis to record levels.

It now stands at an average of £4,426 for every British adult - up from £3,383 the previous year and almost double what was owed five years ago, the study by market analyst Datamonitor shows.

Collectively, we owe £175.6bn - with new lending last year breaking through the £200bn mark for the first time.

Low interest rates, high levels of employment and soaring house prices have created a 'golden age' in spending, says Datamonitor. But it warns that this must end soon.

It predicts the annual increase in debt levels will slow dramatically, dropping to £263 a year over the next five years. It says that by 2008, personal debt will have grown to just £5,741 for every adult.

Oksana Selezneva, financial analyst at Datamonitor, said: 'Clearly, the exact extent of personal over indebtedness is contested and it is near impossible to predict how hard the future rates rises will hit British consumers.

'It is, however, certain that the future growth of the consumer credit market will struggle to match the levels exhibited in recent years. While the overall outlook for the market is largely positive, Datamonitor's forecasts suggest the 'golden age' of consumer credit in the UK has, perhaps, come to an end.'

Credit cards and loans accounted for 80% of outstanding debt, with customers borrowing more than £100bn on their plastic during 2003.

However, the amount advanced through loans actually fell for the first time since 1999 as a result of strong competition from the booming remortgage market.

Hardest hit by their growing personal debts are young adults, who struggle to cover even small increases in interest rates.

Any predicted slowdown would not be good news for Britain's banks, which are expected to announce a surge in profits for the second half of 2003.

The interest rates and high charges they impose on customers who miss loan and credit card repayments are something of a goldmine for the industry.

Datamonitor says the largest lenders maintained their stranglehold on the unsecured personal loans market in 2003, both in terms of outstanding balances and new business.

Between them, the 'big five' - Barclays, Lloyds TSB, the Royal Bank of Scotland, HBOS and HSBC - accounted for 41% of total outstanding balances and 39% of total gross advances in 2003.