Oops! We've borrowed £1.43 trillion

Borrowing by UK households has reached a new record, as consumer credit bounces back in the recovery and mortgage lending continues to grow.

Total borrowing by individuals stands at £1.43 trillion, according to the Bank of England, very slightly higher than the previous peak reached in September 2008, just before the effects of the financial crisis and the recession began to bite.

The precise figure for UK household debt is £1,429,624,000,000.

Most of the debt is in mortgages, which have been rising steadily.

Other lending, including personal loans and credit cards, dropped sharply in the recession and has started to recover.

The rise reflects the willingness of British consumers to borrow again as a more solid recovery comes into sight.

However, the figures may also show the extent to which credit is fuelling the upturn - and how, in some cases, families are having to borrow to deal with the higher cost of living and make ends meet.

The Bank of England points out that incomes have been rising as well, so the ratio of debt to income has actually been on a downward trend.

Where will a cap on payday lenders be set?

Look at Wonga's website and you'll see  it admits to an APR on its short terms loans of 5843%.

Wonga's line is that this rate is unfair because it assumes customers borrow for a year -- which it says they don't -- and it includes lots of extra charges.

It says its interest rate is actually 365% a year.

But how would that compare to a possible cap on the cost of credit in the UK?

France, Germany, Japan and Poland all have caps of around 20%, even less in Germany's case.

Florida has an 11% upper limit.

These rates would surely represent a huge challenge for the likes of Wonga.

In his comments today, the Chancellor referred to Australia as an instructive example, so we should take particular notice of that.

Australia has a 20% cap on up front charges and a 4% cap on monthly interest.

My calculator tells me that 4% a month is the equivalent of 60% a year. A lot, but still well below the Wonga rate.

However, Australian payday lenders are also allowed to charge 200% of the loan in default charges, if the customer has trouble paying back, plus additional debt recovery costs.

So the total bill for the borrower can still escalate.

It is being left to our watchdog, the FCA, to decide an appropriate upper limit for the total cost of credit.

Its worries are:

*set the cap too high and some lenders will actually raise their charges

*set it too low and some might leave the market, pushing desperate customers to illegal loan sharks

Where will it end up: somewhere in the middle? Will the FCA sanction charges which could still add up to hundreds of per cent?

The watchdog is unlikely to want to be seen as a soft touch -- so expect some frantic lobbying from the lenders.

Changes afoot with stamp duty?

Here are the stamp duty rates, from HMRC.

Some Tory MPs are calling for the starting rate to be raised to £500,000.

Scotland is considering moving to stepped rates from 2015, so higher percentages will only be charged on amounts over the relevant threshold.

Residential land or property SDLT rates and thresholds

Purchase price/lease premium or transfer value	SDLT rate
Up to £125,000	Zero
Over £125,000 to £250,000	1%
Over £250,000 to £500,000	3%
Over £500,000 to £1 million	4%
Over £1 million to £2 million	5%
Over £2 million from 22 March 2012	7%
Over £2 million (purchased by certain persons including corporate bodies) from 21 March 2012	15%

If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for £130,000 is charged at 1 per cent, so £1,300 must be paid in SDLT. A house bought for £350,000 is charged at 3 per cent, so SDLT of £10,500 is payable.

£2 million threshold for wholly residential property

From 22 March 2012 SDLT on residential properties over £2 million is charged at 7 per cent It does not apply to non-residential or mixed-use properties.

Half per cent interest rates for longer?

"It is perfectly possible that, as time moves on, the right thing to do will be to keep the Bank Rate at ½ per cent even when unemployment has dropped below our seven per cent threshold," said Martin Weale, a member of the Bank of England's rate setting committee, the MPC.

He was trying to explain the Bank's interest rate policy to A Level students this afternoon: no easy task!

It adds to the Bank governor, Mark Carney's statement this week that:

“One can imagine a scenario where the unemployment threshold is reached, and that the best policy choice for the Monetary Policy Committee in that period of time is to keep rates at current levels, because the trade-off between output and inflation is attractive because we can keep inflation on target and can grow the economy further.”

All this is in the context of Forward Guidance, the Bank's attempt to give us fair warning about when it might raise interest rates. The threshold for considering a rate hike, we had been told, was a fall in unemployment to 7% of the workforce.

Despite acknowledging that the economy is recovering much fast than the Bank of England expected, they clearly want to keep us anchored to the view that they might stick to rock bottom rates if they see fit.

Will fixed rate energy customers get reduced bills?

Update here.

There's a big debate over who should foot the bill for insulation and energy-saving measures under ECO (the Energy Company Obligation).

Up until now the suppliers have had to pay, passing the cost to customers -- adding around £90 to the energy bill.

But after the recent outcry over energy prices, those same suppliers now expect the Chancellor to shift the cost to taxpayers, with the news expected in 5th December's Autumn Statement (shouldn't it be the Winter Statement?).

EDF put up its prices by less than the others, saying it was assuming the Chancellor would lighten the burden. Other companies have said they'll scale back the price hikes they have already announced.

But millions of customers are on fixed price deals. The prices they pay are not supposed to change, raising the risk that they might not benefit from the heralded cut in bills.

Well, I hear from npower today that they will pass on any price reductions to fixed rate customers, even though -- according to the small print -- they don't have to.

Will the other suppliers do the same? They won't want to look like Christmas Scrooges, will they?

Post Office financial boycott

The postal union, the CWU, has said that its members will boycott sales of financial services in main post offices for nine working days from 21st November to the 30th.

There are the 372 Crown post offices, which tend to be the principal offices in the town.

The action WON'T affect the operation of bank accounts, foreign exchange or when customers in and ask directly for a service.

The boycott means that if someone comes in to post a parcel, for instance, staff will not try to cross-sell a financial service, such as insurance.

The biggest sellers at the moment are life assurance for the over-50s and credit cards. And there's travel insurance, of course.

Extinction beckons for quality pensions

The number of salary-linked workplace pensions will fall to zero unless action is taken to make the schemes cheaper for employers, the Pensions Minister Steve Webb warned today.

The government has unveiled proposals to remove legal obligations to gold-plate traditional salary schemes and to improve the lower grade pension arrangements which most companies are moving to instead.

Only 1.7 million private sector employees are contributing to a scheme which promises to pay a proportion of salary on retirement, compared with over 5 million in 1995.

Under new laws employers would no longer be required to give pensioners annual inflation increases. Nor would they be expected to provide pensions for spouses after the former staff member has died.

Pension rights already earned would be secure. But the hope is that by giving bosses the flexibility to cut back future benefits, some of the remaining salary-linked schemes will survive and remain open to new employees.

The legislation could be in place before the next election in 2015, according to Mr Webb.

Millions of workers are being enrolled automatically in new workplace pension arrangements, but for the most part these are not linked to pay.

In many cases the contribution levels are so low that the eventual pension income is likely to be disappointingly meagre.

The forthcoming legislation will encourage companies to provide income guarantees in these schemes, in the hope that people will regard pensions as less of a gamble and contribute more.

The government is also planning to change the law to to allow "Dutch-style" pensions. Employers would be able to band together to offer large-scale schemes which targeted a particular level of pension income.

Ministers have been persuaded that these "Collective Defined Contribution" schemes would be cheaper to run and could provide savers with more certainty about their retirement.