Average household debt set to grow to almost £10,000
24 Mar 2015 | COMMENTS: 0 | Author: Ryan Smith | News
The average UK household will owe approximately £10,000 in non-mortgage debt by the end of 2016, a new report shows.
PwC’s study shows that families have a current average debt of nearly £9,000. This leaves millions of households vulnerable if interest rates start to rise. The rise in debt is being accounted for by boosted confidence following years of uncertainty about jobs and finances during the economic downturn. As Britain has started to turn a corner, the debt has started to pile up again.
This confidence is shown further in the report, as fewer than one in five surveyed (18%) said they were worried about how they will make future repayments. This is down from 2013’s figure of 26%.
Just over a quarter (26%) believe their pay will freeze or decrease in the next 12 months, compared to the 28% that thought this in 2010, following the financial crisis.
But while people find that their debt is currently affordable, if interest rates increase many may struggle to keep on top of their finances. A two percentage point rise could leave households needing to find an additional £1000 a year to manage their repayments.
Simon Westcott is director of PwC’s financial services practice:
“Old favourites such as credit cards are staging something of a revival, while newer forms of borrowing such as peer-to-peer lending are starting to gain ground.
“Despite our survey revealing a relatively high degree of confidence among consumers about their ability to stay on top of their debts, [the] affordability of the UK’s household debt pile may come under pressure in the coming years.
“As the total household to debt income ratio heads towards 172% – exceeding its previous peak in the run-up to the financial crisis – and interest rates increase, consumers could begin to feel squeezed once again.”