Consumer Debt Reaches Seven Year High

January 19, 2015

Luke-Notley small (Custom)The UK’s level of consumer debt reached the highest level in seven years last November according the national consumer helplines, National Debtline and StepChange. November’s consumer borrowing in the UK reached £1.25bn as Britons plunged themselves into loan, credit card and overdraft debt.

Deriving the figures from the Bank of England, National Debtline and StepChange suggested that the findings demonstrated a worrying rise in consumers’ reliance on credit. Furthermore, the helplines are expecting a related increase in the number of Britons seeking help this January as the first credit card bills of the year begin to arrive.

Some banks and credit card companies have been accused of aggressive marketing tactics, offering attractive incentives and low loan rates. The Financial Conduct Authority is due to investigate the UK credit card industry this month over accusations of unfair, aggressive and potentially dangerous marketing to Britons.

The rate of unsecured borrowing was the highest since February 2008, when Northern Rock was nationalised in the midst of the credit crunch. More than £980m was taken out in UK loans and overdrafts during November, a sharp increase from the monthly average of £728m over the previous six months. Credit card borrowing was also above the monthly average of the previous half-year.

The unsecured debt averages out as almost £6,000 per household.

Howard Archer, chief UK economist at IHS Economics, believes increasing pressure to spend before the holidays has contributed significantly to this heightened level of debt: “Relatively high consumer confidence means people have become more prepared to borrow in recent months.

“It also may well be that a significant amount of people have recently been borrowing more due to the squeeze on their purchasing power coming from extended low earnings growth.”

StepChange chief executive, Mike O’Connor, believes the increasing debt levels are indicative of wage levels not growing at the same rate as cost of living: “The economy is growing and there is some wage growth but it is very marginal and millions are living on a financial precipice leaving them vulnerable to financial shocks and strains.

“The prospects are for more austerity and economic prospects are uncertain. People may turn to credit as the only accessible way to try and plug the gap. If and when we see an interest rate rise, many more people will struggle.”

The charity helped 50,000 clients with monetary problems last January and expects to receive an even higher number of enquiries this year.

If you are struggling with unmanageable levels of unsecured debt, the InControl team may be able to help find an elegant solution without plunging you into further debt. Visit our debt management page, or call our expert team on 0800 072 6623 to discover how we could help you.