Even before mortgage costs are considered, the average household in the UK now owes a debt of £12,877.
This figure is based on the findings by The Office of National Statistics which state that at the end of September 2016, the total unsecured debt hit an all-time high of £349bn. However, it is argued that this figure is slightly inflated due to the inclusion of student loans, which have increased substantially over the last 3 years.
The Bank of England have released more recent figures for the end of November 2016, which excluded student loans, this put the total at £192bn. Whilst, not a record high, it is the highest since before the financial crash in December 2008. This is a 10.8% increase in personal debt on 2015.
The main concern is what the borrowed finances are being used for, many debtors are now using credit cards to pay for essential living costs, rather than luxury items. This suggests that people are not able to live on their current wages and with inflation expected to rise in 2017, it is only expected to get tougher for many people.
One way to tackle this, which is being discussed by the government is a “breathing space” scheme which would give people who have fallen into debt a 12 month ‘frozen’ period, where interest, penalty charges, and enforcement actions are put on hold. This will give debtors a chance to regain control, as it is normally these add-ons that tend to force the debt spiralling out of control, with thousands of pounds added to the existing debts.
With the threat of rising inflation, we would urge households considering borrowing any more to review their financial position thoroughly and consider how they would cope with the repayments should their circumstances change for the worse. E.g. Job loss.
If you are in debt and struggling with repayments, we highly recommend seeking help and taking control of your finances before inflation and interest rates rise.
To discuss your situation and receive sensible debt advice contact Clive on 01656 661426 or click here to contact him.