THE MONEY STATS – Unsecured private debt tops £190 billion

The Money Stats are out today and total outstanding consumer credit has risen above £190 billion, the highest level seen since 2008. For a sense of what this means for the average family, that’s £7,042 for every household in the UK in credit cards, personal loans and other borrowing not secured against property.

Day-to-day, people have more control over how much they borrow to spend than they do over their mortgages. So when incomes squeezed and borrowing became harder, consumer credit saw a large fall after the financial crash. And it didn’t really begin to rise again until 2014, but is now growing at an annual rate of 8% in 2016 so far, or £476.07 per household since October 2015.

That’s not quite like the double-digit percentage rises we saw in the late 90s and early 00s, but it’s still more than three times the 2.4% average wage rise.

Compared to the average mortgage interest rate of 2.71%, unsecured borrowing is much more expensive.

The average interest rate on credit card lending bearing interest was 18.33% in October. For a £5,000 personal loan it’s 9.06%, and for a £10,000 loan it’s 3.75%. If you have an overdraft, you’ll be paying 19.70%!

These higher rates of interest mean it’s easy to slide into problems if you’re not keeping borrowing under control. With inflation and interest rate rises predicted next year, we should all be getting ready for a time when these debts become even harder to manage.

December Press Graph

Source: Bank of England

Michelle Highman, Chief Executive of The Money Charity says:

“It is figures like these that remind us at The Money Charity how important our job is. We’re out there every day helping young people and adults learn the knowledge, skills, and attitudes they need for a healthy relationship with money.”

“£7,000 of unsecured debt for every household is a worrying figure. If it’s well managed, not all debt is bad. It can be a really useful to us, helping to spread the cost of big purchases, or smooth out uneven incomes. But if you don’t plan, or you don’t know what you’re entering into, it can be very dangerous as well. And if you are spending more than your bringing in month after month, you know you’re in trouble.“

 “So it’s especially important to stay in control of your borrowing, and there’s help available at an early stage if you’re in difficulty. If your debt feels too much to deal with, there’s free, impartial advice available from organisations like StepChange and National Debtline.”

Other key points from December’s Money Statistics include:

  • Citizens Advice Bureaux across England and Wales dealt with 612,209 new enquiries in the three months between July and September 2016.
  • The Pensions Regulator estimates that at least 6.871 million employees had joined a pension scheme under auto-enrolment by the end of October 2016.
  • According to the November 2016 Budget analysis from the Office for Budget Responsibility, public sector net debt is forecast to peak at 90.2% of GDP in 2017-18, before falling to 84.8% of GDP in 2020-21.

Get the full picture, and many more fascinating facts about money in the UK in our monthly Money Statistics.