Worrying numbers of householders may be "in too deep" with their borrowing, a city regulator boss has said.
Consumer credit levels are close to a 2008 peak, said Jonathan Davidson of the Financial Conduct Authority (FCA).
He said it was "far from certain" that customers who could just manage loans now would be able to do so in future.
He also warned lenders that the FCA would come down on firms whose businesses were based on people being unable to clear debts.
"There are a significant number of households that are in so deep that the slightest sign of rough weather could see them in over their heads," said Mr Davidson, who is one of the FCA's directors of supervision.
Speaking at the Credit Summit in London, Mr Davidson said one in five mortgages today are interest-only. Many of these, he said, were made to borrowers with little equity in their homes and "not a lot of disposable income".
He said the consumer credit sector served around 39 million people with loans to help finance a car, a big purchase or so they could make ends meet towards the end of the month.
Rising default rates
Now, he said, some arrears and default rates, while still low, were on the rise.
"If we're seeing this pattern now, what would happen if there was an economic downturn?" he asked.
He added that the FCA would take action against firms whose business models were "predicated on selling products to customers who can't afford to repay them".
"The £14.8m paid out by [hire purchase firm] BrightHouse last year shows how seriously we take this.
"And it's not just unacceptable, it is unsustainable – the reputation damage of running a business of this kind will see confidence, and customers, drain away," Mr Davidson added
The Bank of England warned in September that lenders were underestimating the hit they would take from consumers defaulting on debt in a downturn.
The Bank's Financial Policy Committee (FPC) said there were "pockets of risk" in the level of lending on loans, overdrafts and credit cards.
And research by BBC News found in February that the value of outstanding personal loans in Great Britain has grown four times faster than wages.