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UK Household Debt Continues to Rise


A report published by the Office for National Statistics (ONS) has officially confirmed what many have suspected: UK personal debt is again on the increase.

The ONS Wealth and Assets Survey looks at UK personal debt levels every two years, with the most recent survey looking at the period between April 2016 and March 2018.

The survey has found that the average level of UK household debt (excluding mortgages) increased over that period to £9,400 on average, totalling £120 billion.

The amount owed to personal loans and credit cards the survey found had increased by 11%.

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The Student Loan Bubble

However, it also found that much of the increase is due to high levels of student loans and also hire purchase debts for items such as cars (it is now believed over 81% of all new car in the UK are purchased using car finance agreements).

However, the report does admit that the survey was skewered by the £32 billion of debt that is owed in Student Loans and amounts to 26% of the total £120 million.

The vast majority of the student loans, it admits, will never be repaid by those that borrow them.

Some, like Money Expert, Martin Lewis have even argued when we are talking about debt, we shouldn’t even consider Student Loans as debt and instead have argued it should be treated as a graduate tax.

Others, however, have also argued as much of the debt is not repaid, it would be more appropriate to treat it as part of the UK National Debt rather than as part of personal debt, as ultimately if the borrower doesn’t pay it, the Government has to.

However, the report also found personal loans, credit cards; overdrafts and hire purchase agreements amounted to £87 billion.

It also found that the poorest 10% of households have debts three times larger than their assets, while the top 10% have other assets, such as property and pensions that are 35 times larger than their debts.

The point being not all that £87 billion in debt is problem debt.

Not all Debts are Equal

However, the report also makes the point that not all debts are equal.

There is a big difference, for example, between a low-cost, affordable loan for home improvements, that someone can afford, and a pay-day loan or guarantor loan, which is high-cost and is not affordable.

One of the important measures the report found for understanding if debt is a problem or not, is by asking the person themselves how they view it.

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Problem Debt is more than just a Heavy Burden

In doing this the Report found that of all those adults surveyed, 14% believed their debt was a “heavy burden”, whilst another 30% found it to be “somewhat of a burden”.

Problem Debt is more than just a burden though.

It found Problem Debt was more severe, and could have an adverse effect on people’s finances and could impact on living standards, family stability and financial inclusion.

It treated households as having Problem Debt when the debt amounted to more than 25% of their disposable income and where one household member had reported falling behind in payments, or where the debt repayments amounted to more than 20% of the household’s annual disposable income and one household member reported the debt to be a “heavy burden” on them.

Using these definitions, the Report also found there had been an improvement on the last survey that was completed between 2014 and 2016, when it found 6% of all households surveyed had problem debts, but in this survey, only found 4% of households had Problem Debts.

Tackling Problem Debts

If you are affected by Problem Debts or you are finding your debt repayments are a “heavy burden” on you, then “you should seek professional advice and assistance” said Stephanie Chapman, the Chief Operating Officer at Creditfix.

“What is positive about this latest Survey is it is showing that UK consumers are beginning to tackle the level of problem debts they have, but it also shows there are still significant numbers of people who are struggling with Problem Debts and also find their monthly repayments to be a “Heavy Burden”.

“We encourage people who are struggling with these problems to seek advice, as often there are solutions and our professionally trained staffs are able to assist people who come to us for help”

Creditfix is a leading UK debt solution provider. If you want to speak with a Creditfix Money Adviser, call 0808 2234 102

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