UK consumer debt burst through the landmark £1 trillion barrier last year, reaffirming Britain’s place as Europe’s most indebted nation – a title which no other country is anywhere near to stealing from us.

After almost six years of interest rates below six per cent, soaring house prices and increasing competition in the credit card and personal loan markets, credit is cheaper and more easily accessible than ever before.

Over the past decade, the market’s cheapest loan rates have more than halved from a massive 15 per cent to less than six per cent – over a period where the Bank of England’s base rate has fallen just 2.5 per cent.

Meanwhile, an influx of new credit card providers have created such intense competition that many lenders are now literally giving money away – charging customers no interest on their borrowings for as long as 12 months. The birth of zero per cent balance transfers – and more recently, the proliferation of cards which charge zero per cent on purchases too – have transformed the UK credit market, helping us to become the only country in Europe where the number of credit cards actually exceeds the number of people.

Against such a backdrop, the explosion in consumer debt is no surprise. Figures from Datamonitor, the research analyst, reveal that since 1998 the average unsecured borrowing per adult has risen more than 50 per cent, from around £2,200 to more than £3,500. If this is added to the increasing amounts that people are borrowing to finance their homes, the figure rises to an astronomical £25,000 per person. Over the longer-term, this is simply not sustainable.

Hitting the £1 trillion mark has drawn more attention to the world of consumer debt than ever before, with dozens of politicians and consumer groups having emerged from the woodwork over the past year to warn of the impending crisis.

With Britain so highly geared, every upward shift in the base rate hurts consumers like it never has before. However, with the spike in consumer borrowing now well behind us, the latest efforts to control Britain’s debt problem may have already come too late.

The five interest rate rises since November 2003 have so far only hurt those with variable rate mortgages. The remainder, however, have been shielded from the impact by fixed rate mortgage deals which are now expiring – exposing borrowers to much harsher rates. In the credit card market, where many borrowers have been avoiding the inevitable by shifting their debt from one zero per cent offer to the next, the music may also be about to stop.

After six years of intense competition during which credit card providers have been continually slashing their margins, the first signs of strain are now starting to show. Barclaycard and Mint – two of the largest companies – have already begun charging fees on balance transfer deals in a bid to recoup lost profits. The pundits predict that this may mark the beginning of the end for the zero per cent era.

For those who have built up considerable debts on zero per cent credit cards – or who have over-borrowed on soon-to-expire fixed rate mortgage deals – 2005 is shaping up to be a particularly sticky year.

For many others, any further rate rises will send their monthly mortgage repayments so high they will be forced to dramatically cut back on their spending.

For the Bank of England’s monetary policy committee, whose job it is to set the UK base rate, Britain’s reliance on credit has made their job much harder. Mandated with the challenge of keeping UK inflation within strict boundaries, the committee knows that any further hike in interest rates could have a much greater effect than ever before.

While it may be still be possible to avoid an uncomfortable bursting of the UK debt bubble, policymakers need to act swiftly. Public information campaigns that apply the same shock tactics as the latest smoking or irresponsible driving adverts are the kind of steps that need to be taken to wean Britain off its latest dangerous addiction.

With the clock already ticking, any further inaction will leave the British economy facing its worst shock for more than a decade.