LONDON -- Mortgage market turmoil. A painful housing slump. Economic concerns don't get any worse than they are these days in America, right?
Wrong. Try coming to Britain. After a decade of unprecedented economic growth, this nation of perhaps the world's most overextended borrowers might finally be forced to pay the piper.
High debt "really snuck up on me without me realizing how bad things were getting," said Erire Obano, 40, a songwriter who had to sell her London home this month after she remortgaged her property - twice - to pay her rising debts.
As she fell behind on mortgage payments that rose from $1,200 a month five years ago to $4,000 a month today, "I was living off credit cards there for a while and it wasn't a good thing," she said. "The debts just grew like crazy."
Today, British consumers owe $2.7 trillion on credit cards, mortgages, and other consumer loans - more than the value of all the goods and services produced by its economy in a year, according to accountancy firm Grant Thornton.
"Personal debt exceeding Britain's GDP is a worrying milestone in our buy-now-and-pay-later culture," said Martin Bamford, a personal finance adviser and author in Surrey, England.
Indeed, personal debt in Britain is growing by $1 million every two minutes, according to www.creditaction.org.uk, a nonprofit financial education group.
The average household now owes an amount equal to 166 percent of its annual disposable income, 30 percent higher than in the United States.
Debt worries were not very evident here over the past decade of economic euphoria. As home prices tripled, with the average house price recently smashing through the $600,000 mark in London, owners borrowed against that value to fuel consumer spending. Investment rolled in as the city prepared to host the 2012 Summer Olympics, and $2 million bonuses were handed out in the booming financial sector.
Then the collapse of the subprime mortgage market in the U.S. sent ripples around the world.
When Britain's fifth-largest mortgage lender, Northern Rock bank, asked the Bank of England for emergency funding, panicked customers lined up outside branches to withdraw their funds.
"It's been a rocky week for Britain's retail banks and their customers," said James Edsberg, a partner in the retail strategy firm Lighthouse Global. "The Northern Rock bank has been the first to suffer from the impact of the global credit crunch on this side of the Atlantic."
Evidence mounts that homeowners are starting to buckle under the squeeze of the central bank's five consecutive interest-rate increases, to 5.75 percent, in the past year.
The number of people declaring bankruptcy soared 28 percent in the year ending this June, while the number of home repossessions zoomed 30 percent.
Sean Gardner, chief executive of financial Web site www.MoneyExpert.com, said the effects of the interest rate increases are just beginning to bite.
"Some people have inevitably been pushed over the edge with bankruptcy or insolvency, an increasingly common route for many," he said. "But that's the tip of the iceberg really. The statistics hide millions of people whose finances are at the breaking point."
The result has been to cause banks to write off $7.5 billion in debts in the first half of the year.
These write-offs wouldn't be such a worry if the housing market holds up. But if it falters - as many say it already has in some areas - then the write-offs might be the tip of an economic meltdown.
"A combination of further interest rate rises and higher unemployment figures could be an absolute disaster right now," said Bamford, the financial adviser.
Hari Sothinathan, an analyst at Knight Frank real estate agency, said the global tightening of credit could bring more risks into the British mortgage market.
Particularly vulnerable is London, where any downturn in profitability in the financial sector would spark a cooling of the housing market.
"It is likely that there will be a discernible shift towards a lower rate of growth in the second half of 2007," Sothinathan said. "Indicators on sales volumes and market activity have shifted in recent months, with lower sales and mortgage lending recorded on a year-on-year basis."
Some financial experts are more sanguine about the future.
"The situation is increasingly difficult for many people, especially now that credit is becoming more expensive and harder to get," said Peter Spencer, an economics professor at the University of York.
"However I don't think the problem is as serious as in the early 1990s when rising unemployment and falling house prices pushed thousands over the edge," he said. "The labor and housing markets are much stronger now than they were then."