Worrying news suggests that the average British household will be in debt to the tune of nearly £10,000 by the end of this year, made up of unsecured personal debt such as credit cards, overdrafts and personal loans. In cash terms, this level represents a new record and will cause concern to government policymakers and debt charities alike.
The total amount of non-mortgaged debt grew by 9pc in 2014, or almost £20 billion. This represents the fastest increase in ten years, according to the survey findings from PriceWaterhouseCoopers.
The Risk of Bad Debts
The authors warn that if consumers become complacent in their daily debt management, the risk of bad debts will increase. The new level is now also higher than it was before the credit crunch, despite many consumers having taken out debt management programmes, IVAs and even choosing to go through insolvency during the recessionary period following 2008, as a means of exiting problem debt for good.
PwC believes that unsecured borrowing is set to further increase over the next 2 years by up to 6pc each year, meaning that Britain’s consumers face unchartered levels of personal debt. Around 2,000 British people were surveyed, and found to be in danger of complacency about their financial situation.
Low Interest Rates Won’t Always be Low
The cost of all this borrowing may be relatively affordable because of record low levels of interest rates, but even a 2pc rise on household interest rates – including mortgages – would mean that consumers would need to find an additional £1,000 annually simply to meet the added cost of borrowing. For many now experiencing concern about escalating debt, management plans such as an IVA are likely to become increasingly attractive options, with providers ready to handle the entire process from end to end and allow customers to start afresh. https://www.carringtondean.com/individual-voluntary-arrangement-iva/.
Of those surveyed, only 18pc said they were concerned about meeting repayment obligations in the future, compared to 2013’s survey figures of 26pc. However, PwC has identified warning signals, which suggest that those aged between 35 and 44 in particular are becoming increasingly dependent on the use of credit in order to afford everyday essentials. Around 20pc of those in this age group have said that they borrow money simply to make ends meet.