UK Personal Debt Up by £30bn Over Past Year


August 2016

UK Personal Debt Up by £30bn Over Past Year

According to the latest statistics from the Money Charity, individuals in the UK owed a total of £1.484 trillion by the end of June 2016 - up from £1.444 at the end of the previous June.

Broken down, this worked out at an average of £54,900 worth of debt per UK household, including mortgages - up by around £300 from May - or £29,379 per UK adult.

By far and away, the majority of this is secured, predominantly mortgages. Consumer credit debt made up £186 billion of the total - up £11 billion from last year. Of this, £65.2 billion was made up of credit card debt.

Overall personal debt levels in the UK have been increasing slowly but steadily since 2011, following a short period of slightly decrease between 2008 and 2010, and successive sharper increases before that.

The Money Charity’s statistics come soon after the release of a study from the Association of Chartered Certified Accountants into the consequences and reasons behind consistently increasing levels of debt since the financial crisis of 2007/8. In particular, it focuses on the effect of rising indebtedness among those with little “financial resilience in the form of adequate savings insurance and access to responsible credit”.

For those without adequate financial resilience, the report explains, any “unexpected expense or loss of income can easily turn into so-called ‘problem debt’”. It goes on to argue that currently, financial resilience among lower income households is poor and is becoming increasingly difficult to build up, while debt levels are going up.

Not all debt is problematic, but a recent study conducted by the Money Advice Service estimated that almost one sixth of UK adults are currently living with ‘problem debt’. The MAS define problem debt or “over-indebtedness” as being at least “three months behind with their bills in the last six months or have said that they feel their debts to be a heavy burden”. The self-diagnosis of the size of the burden may affect the figures here; for example StepChange, the debt charity, estimated there to be far fewer (2.9 million) individuals with ‘problem debt’ back in 2013 but with increases over time we can reasonably put the figure between the two, and likely close to the MAS’ 8.8 million total.

The availability of relatively cheap credit, largely in the form of cards or mortgages means that the net amount lent out continues to increase, having gone up by £5.3 billion during June, amounting to £173 million per day, according to the Money Charity.

They also show that during the course of the first quarter of 2016, £624 million worth of debt was written off, or £6.9 million every day. Further to this, around 247 people in the UK declare insolvency or bankruptcy every day.

With debt as a growing problem, it’s important to always be aware of the various solutions available, but also to make sure to be sensible when it comes to use of credit so that you don’t find yourself spiralling into debt that you can’t afford to pay back.