The amount of homes across the UK that are now dealing with problem debt has gone up by 25% since 2012 up to the end of 2014. The TUC has put this down, in large part to the slow movement that wage levels have seen – leading to more people having to borrow money to make ends meet.
In 2014 there were over three million families that were spending a minimum of a quarter of their monthly income on paying off unsecured debts. This level of expenditure on unsecured loans is what is used to define “problem debt”.
Back in 2012 the TUC and Unison paid for research that revealed there were 2.5 million in this position.
Those most affected by the rising levels of debt are families on lower incomes, people who are self-employed and young people.
The research went on to say that there were around 1.6 million homes in the UK that currently spend more than 40% of their household income on repaying debts that were not related to their housing costs. Out of these people there were over 1.1 million who earn less than £30,000 each year.
The amount of money that people are borrowing on products such as credit cards has not yet gone up to the levels that were seen before the economic crash. However unions have been quick to point out that the real fall in wages has meant that the income-debt ratio remains low.
The survey also showed that amongst self-employed people problem debt had almost tripled. In 2012 there were 6% of self-employed people with debt that was classed as having serious credit problems but last year that number had risen to 12%.
The unions have now said that this information is proof that the economic recovery is not going as well for everybody as is believed and there is still a significant burden that lingers on many families. Frances O’Grady, the general secretary of the TUC, said that this news is even more worrying given the fact that interest rates are set to rise soon.
ìRising household debt is not the sign of a healthy economy. People raiding their piggy banks and borrowing more than they can afford is what helped drive the last financial crash,î she said. ìWe need a wages-led recovery that works for everyone, not another debt-fuelled bubble.î
The general secretary for Unison, Dave Prentis, believes that families would take many more years to recover fully.
ìWages might finally be picking up for those in the private sector, but anyone working in health, education, local government and our other public services still has many more years of pay restraint to survive,î he said. ìAnd soon to be introduced cuts to tax credits will push many low-income families yet deeper into debt.î