The average UK household owes thousands of pounds in unsecured debt, according to new research.
A report published on 23 March by professional services firm PwC revealed that total outstanding unsecured borrowing grew by £19.7 billion, or nine per cent, in 2014, its fastest rate of growth in at least a decade, to reach £239 billon, or nearly £9,000 per household last year. It forecast that the average UK household would owe close to £10,000 in unsecured debt by the end of 2016.
Almost half (46 per cent) of last year’s increase in unsecured borrowing came from student borrowing, with PwC estimating that graduates who started university after 2012 could leave with an average debt of £40,000-£50,000.Almost a quarter (22 per cent) came from credit card debt and a third (32 per cent) other sources, such as personal loans and overdrafts.
Meanwhile, a joint PwC/YouGov survey of around 2,000 Britons’ attitudes towards debt revealed that most people feel confident about their finances. Britons’ confidence in their ability to stay on top of their debt has improved, with only 18 per cent of people worried about how they will make future repayments, down from 26 per cent in 2013
However, the report suggests that there could be challenges ahead for Britons seeking to stay in control of their borrowing.
It found that a two per cent rise in interest rates on total household debt – including secured debt – would leave households needing to find an extra £1,000 a year, just to cover the additional interest costs.
Simon Westcott, a director in PwC’s financial services practice, said: “Despite our survey revealing a relatively high degree of confidence among consumers about their ability to stay on top of their debts, affordability of the UK’s household debt pile may come under pressure in the coming years.”
Andrew Skinner, head of Palmers’ Insolvency team, said: “If household debt levels continue to rise, there may also be an increase in individuals facing serious financial difficulties in the future. If problems do arise, it is important to seek advice early, as this will maximise the options available to resolve the situation.
“The Palmers team can provide sensitive professional advice and guidance on personal insolvency matters, including Individual Voluntary Arrangements –
agreements with creditors to pay all or part of your debts over a period of time where the debts involved usually total at least £15,000. For more information, please contact our insolvency team.