Mervyn King said that some people had taken on “far more credit than it was ever plausible to repay”, prompting fears that bankruptcy beckons for many.
“All lenders and all borrowers should think very carefully before they either lend or borrow,” said the governor, according to the Daily Telegraph.
“It’s very serious for them. It’s a real social problem,” he added, though he stressed that debt was not yet big enough a problem to spark a consumer crisis.
Mr King also painted a picture of Britons with mortgages facing a debt crisis if their financial situations deteriorate.
However, the governor said that most people were suffering from credit card debt and other personal loans, at a time as the number of insolvencies increases.
“There is a risk that the impact on spending could become more significant if debt problems
were to become more widespread,” warned Mr King, adding that household debt had doubled since 1999.