The financial landscape for households in the UK paints a concerning picture, with the average household spending a significant portion of their income on debt repayments. According to findings from the HL Savings & Resilience Barometer, the average monthly expenditure on debt repayments, excluding mortgages, stands at £406.

Delving deeper into the data reveals the stark reality faced by many families. Those with mortgages bear an even heavier burden, shelling out an average of £814 in addition to other debt obligations. Alarmingly, nearly one in ten households find themselves in arrears, with the figure soaring to 27% among the lowest fifth of earners.

The research also highlights a growing sense of unease among individuals regarding their debt position, with one in five expressing concerns. Contributing to this apprehension is the surge in credit card debt, which has escalated by 12.7% over the past year, reaching a staggering £68.9 billion. Additionally, other forms of consumer debt, including loans, overdrafts, and car finance, have surged by 6.7%, totaling £150.4 billion, as reported by the Bank of England.

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, sheds light on the underlying factors driving this concerning trend. Coles emphasizes that the relentless rise in prices has stretched budgets to their limits, exacerbating debt levels for millions of families. With higher interest rates compounding the pressure, households face the daunting task of managing escalating debt repayments, further straining their financial resilience.

While higher earners bear the brunt of larger debt burdens, Coles underscores the challenges faced by lower-income households in managing debt repayments within tighter budgets. Despite lower monthly payments, individuals with limited financial resources find it increasingly challenging to keep up with their debt obligations.

The situation is compounded for mortgage holders, with average repayments reaching £814, and climbing to £921 for those aged 40-44. The strain is particularly acute for individuals who have remortgaged amid soaring interest rates, placing one in four mortgage holders at risk of encountering repayment difficulties by the year’s end.

Looking ahead, Coles warns of the looming crisis as households teeter on the brink of financial instability. With a significant portion of households lacking adequate emergency savings, the risk of mortgage difficulties and unsustainable spending levels looms large. Urgent action is needed to bolster financial resilience and mitigate the impact of escalating debt burdens on households across the country.

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Last Update: February 26, 2024