The average UK household debt is now at a record £15,400
The UK’s household debt mountain has reached a new record high, with UK homes now owning an average of £15,385 to places such as credit card firms, banks and other lenders, according to figures released by the TUC.
The trade union body has stated that household debt has risen sharply in 2018 as years of austerity and wage stagnation forced households to increase their borrowing.
The TUC said in its annual report on the nation’s finances that amounts owed by British households rose to a combined £428bn in the third quarter of the past year. On average, each household owed £886 more than it did 12 months previously. The statistics do not include outstanding mortgage debts but they do not include student loans.
The level of unsecured debt as a share of household income is now 30.4%, which is the highest level that it has ever been at. This includes credit cards, personal loans and short term loans. The sum owed by debtors is well above the £286bn peak in 2008 before the effects of the financial crisis kicked in, stated the TUC.
The TUC general secretary Frances O’Grady has stated that: “Household debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red. The government is skating on thin ice by relying on household debt to drive growth. A strong economy needs people spending wages, not credit cards and loans.”
To compile its figures, the TUC compared the total amount lent in-store cards, personal loans, payday loans, overdrafts and outstanding credit card debts. This also included student loans, which unsurprising added a substantial amount of debt to the overall figure. Graduates can now expect to leave University with a degree and £50,000 in debt. However, they are not required to make a student loan repayment until they earn over £25,000 per annum at present (recently changed from £21,000 per annum).
Customers with bad credit are regularly lured into taking high-cost loans and the risk of being caught into a debt spiral. Those with bad credit should look for low-cost alternatives such as using a guarantor, applying through a credit union and using interest-free credit cards, according to Payday Bad Credit.
Despite rising consumer and household debt, a recent review by the City Watchdog, the Financial Conduct Authority stated that they pleased with the measures taken to regulate the high-cost loans industry and will not be reviewing the pricing and regulation until 2020. However, some sources of finance raised eyebrows for lack of transparency and high costs including unauthorised overdrafts, car finance and catalogue finance too. These products are currently under the review of the FCA and new regulation is expected later this year.
The editorial unit