Beware of Financial Crisis Part 2

Following the Government's announcement to encourage banks to increase lending, David Kuo, financial expert at money website Fool.co.uk, urges anyone applying for credit to be extra cautious.

"It is vital that the Government do something to get credit flowing again. Leaving borrowers high and dry is not an option because excessive debt is like an addiction. We need to wean ourselves off it gradually, because going cold turkey could cause untold damage.

"However, new borrowers who now hope to take advantage of fresh and available credit must learn the lessons of the past. For instance, applying for a mortgage, based on current salary multiples, may seem cheap today. But tomorrow, when interest rates rise, as they surely will, those mortgage repayments could quickly become unaffordable resulting in dire consequences.

"Fool.co.uk is also urging lenders to act responsibly. Currently, consumer debt in Britain stands at more than £1.4 trillion. Common sense tells us that burdening the nation with even more of the same is not the answer. So unless we learn from past mistakes, this bail-out could be the start of Financial Crisis Part 2."