British household debt appears to be spiralling out of control, according to the latest figures obtained from the Bank of England.
Consumers now owe an incredible £1.46 trillion collectively, up from £1.41 trillion in June 2007 just before the financial crisis.
These macro figures were given some personal meaning in a recent 2002 person survey on behalf of MoneySuperMarket, a price comparison site. It found that two thirds of those questioned in January admitted they had some form of unsecured borrowing, which has gone up markedly since last year. In 2014 the amount borrowed in this way came to £4,412 on average each. Now the average amount people owe on unsecured credit is £5,898 each, a 34% increase since last year, either on a credit card, personal loan, overdraft, store card or finance agreement.
Half (50%) of those questioned owed money on a credit card, while a quarter (23%) are in debt through their overdraft and 12% have taken out a personal loan.
The research showed the younger generation aged 18 to 34 have seen their debts almost double within a year from £5,446 to an astonishing £10,058 on average – an 85% increase. Meanwhile, 35 to 54 year olds owed £5,211 (an increase from £4,298 in 2014). Those aged over 55 years were the only age group to see their debt decrease within the past year – from £3,107 to £2,528 on average each.
Men have also relied more on credit than women in the last 12 months, and currently owe £7,509, whereas women owe £4,139. Last year, the average individual amount owed by each gender was £4,821 and £3,899 respectively.
Consumer spending is clearly on the rise, as almost half (47%) of those in debt owe more money than they did last year. A fifth (21%) of these did not owe any money last year but now have debts of £1,015 on average, while 45% owe the same or less than they did last year.
Dan Plant, consumer expert at MoneySuperMarket said: “This research begs the question whether the economic recovery being celebrated by politicians is simply based on a rapidly climbing debt time-bomb.
“Not only are personal debts up by 40% across the board – with under 35s worryingly seeing what they owe more than double in just a year – they are being paid off more slowly than a year ago. This suggests the British public may be robbing Peter to pay Paul, with the increased consumer spending we’ve witnessed just a by-product of this – which would be hard to sustain. It was borrowing at excessive levels that was one of the contributing factors to the economic crisis so we must hope we aren’t witnessing a repeat of mistakes of the past.”
Only 36% of borrowers think they will pay off their debts within a month, with a further 24% expecting it to be cleared within a year. However, 14% of borrowers think they will be saddled with the debt for two to five years, slightly up on the 13% who felt that way last year.
Equity Release regarding your Debts
Can you get an equity release if you have arrears? Yes, you can still get an equity release if you have arrears. Debts secured on your property (for example a mortgage with arrears), will need to be repaid in full. You can repay the sums owed with the equity release funds.