The Money Charity has recently revealed results of a study into UK finances.
Their research has been ongoing since 2005 and gives an overview of the average
household debt in the UK. The overall findings were that debt in the UK is
£1.476 trillion as at the end of May this year. This is an increase from
2015’s figure of £1.439 trillion (£773.78 per UK adult).
The report has shown that significant debt is commonplace and growing in the UK
with each household on average owing £54,740. Whilst this figure includes
mortgages it is still a large burden of responsibility on UK adults and equates
to an average of £29,266 per UK adult and each figure is an increase on last
year and even in some instances on the previous month.
Forecasts show that the level of UK household debt shows no signs of abating as
predictions from the Office for Budget Responsibility in 2015 suggested it could
reach £2.551 trillion by the first quarter in 2021. This would make the average
debt by then reach £94,981 per household, based on the current number of UK
Debt in the UK can’t just be levelled at mortgage payments as the figures for
consumer credit show. The average consumer credit borrowing was £3,649 in May
2016 and again this had increased on the previous month. Credit card debt alone
reached £67 billion in May 2016 which equates to £2,397 per household. Paying
the minimum payments alone would mean it could take around 25.5 years for each
household to repay their debts in full.
Lending rates in May also showed an increasing picture with the amount loaned to
individuals by banks and building societies rising by £4.3 billion –
equivalent to £143m a day. Mortgage lending and consumer credit lending both
demonstrate and increase of £2.8 billion and £1.5 billion respectively.
At the other end of the spectrum a large amount of debt is written off by bank
and building societies. In the first quarter of 2016 this was £624 million with
over half this amount being credit card debt. For those in serious financial
difficulties there were 20,382 individuals declaring themselves bankrupt in the
first quarter of 2016 across England and Wales. This is the same as 226 people
per day and is an increase on the previous quarter, albeit a 2.2% decrease on
the previous year.
To match the trend of increasing financial woes in UK households the Citizens
Advice Bureau also reported a rise in contact with those that are struggling to
make ends meet. They dealt with 4,495 new cases of debt problems during each day
of quarter 1 up to March 2016.
The general picture of UK debt is certainly one that it is increasing and
expected to increase over time. Whilst this isn’t necessarily an encouraging
summary it demonstrates a need for responsible lending as well as people taking
control of their finances appropriately rather than spiralling into debt that
they have no chance of paying back. Positive news for many homeowners is that
interest rates remain low at 0.3% and so mortgage payments aren’t likely to
dramatically increase. Whilst the increasing reliance on credit may be worrying
it seems to be a pattern for many people as well as being anticipated by