News Category: Debt
Personal consumer debt (made up of mortgages, loans and credit cards) has increased by 5% over the last year, to a staggering £1.41 billion. This is greater than the entire United Kingdom's gross domestic product (GDP), and represents an average debt of just over £58,000 per household, for 25 million householders in the UK. Recent research by Grant Thornton highlighted the increases in personal borrowing, despite the gloomy economic outlook and the difficulty people now face in obtaining unsecured loans and credit cards, personal debt continues to rise at alarming rates. This £1.41 billion figure includes the assets of the UK is housing stock. Equity released from property in recent years to spend all housing improvements may have been all but neutralised by house price falls. Indeed releasing equity as a means of consolidating loans or debts or raising cash for luxury items is now becoming impossible for huge numbers of people who bought properties with the last two to three years and have now seen the gains wiped out, due to the property slowdown.
Families are finding it increasingly difficult to afford luxuries with the rising costs of household energy bills and food. On average a UK family will be paying £1,300 a year on gas and electricity as a result of the global rise in crude oil and gas prices. The government expects 20% of households to be in fuel poverty this winter, as energy supplier of energy supplier announces increases in consumer bills. Consumers have little choice but to conserve and become more energy efficient around the home and take fewer journeys in cars. It is unlikely that any energy savings will counter act the huge price rises from utility suppliers. Grant Thornton believes that personal insolvencies are likely to increase over 2008 as a result of increased personal borrowing in a difficult employment and economic background. They noted that there is usually one year's gap between individuals that have borrowed heavily and had the point in time at which they become formally insolvent.