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An EU performance report says that one of the reasons UK economy was faltering was because of high accumulations of household debts (31 May 2012)

Date: 31/05/2012
Duncan Lewis, Legal News Solicitors, An EU performance report says that one of the reasons UK economy was faltering was because of high accumulations of household debts

A European Commission report has warned that UK was getting destabilized because of high house prices and mortgage debt.

Evaluating the performances of EU member states the Commission report said UK had insufficient and rigid housing supply which was a cause for concern.

It further said that the debts that households have accumulated over the past decade were very much connected to high house prices which were the cause for disparity in the UK economy.

The household debts were rising steadily since the past decade it said noting that high debts of households made them susceptible to higher rates of interests or in unemployment which were the main cause for undermining the economy in general.

If the house prices were to rise any further in relation to the disposable income then household indebtedness would further worsen it warned.

With already current signs showing housing demand and interest rates were looking skywards in the near future, insufficient and rigid supply of housing in the UK was inevitably exposing the country to a higher and unpredictable house pricing.

The report, produced as part of increased monitoring powers in the wake of the economic crisis, says the 'noticeable under performance' of the UK regarding external competitiveness and export developments deserves attention.

It adds 'Although its potential macroeconomic risks appear less pressing than those arising from internal developments'.

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