Personal Debt

As of 2024, debt in the UK continues to rise at a much higher rate than the average household income. Contrary to popular belief, high borrowing is not confined to those with low incomes. The media has highlighted numerous cases of wealthy and famous individuals who have fallen into the debt trap. From royalty to former millionaires, various high-profile individuals have been named for spending beyond their means. It is a well-known fact that for most people, as their wealth increases, so does their level of spending.

This situation has been exacerbated by the high inflation the UK has experienced over the last year. The rising costs of goods and services have put additional financial pressure on households across all income levels, further contributing to the increase in borrowing. Inflation has eroded the purchasing power of money, making it more difficult for families to maintain their standard of living without resorting to credit. Consequently, the combination of high inflation and increased spending habits has led to a significant rise in overall debt levels.

As of the end of April 2024, people in the UK owed a total of £1,850.1 billion. This is an increase of £18.2 million from the £1,831.9 billion owed at the end of April 2023, meaning an extra £339.65 per UK adult over the year. On average, each household's total debt, including mortgages, was £65,143. For individuals, this equated to £34,487, which is about 97% of average earnings, up slightly from £34,370 a month earlier.

Based on figures from April 2024, the UK's total interest payments on personal debt over a 12-month period amounted to £76.96 billion, averaging £210 million per day. This translates to an average annual interest payment of £2,710 per household and £1,435 per person, representing 4.03% of average earnings.

According to the Office for Budget Responsibility's forecast from November 2023, household debt of all types is expected to rise from £2,259 billion in 2023 to £2,429 billion in 2025. This would make the average total household debt £85,274, assuming household numbers follow the ONS population projections.

At the end of April 2024, outstanding consumer credit lending stood at £227.04 billion, which is an increase of £3.7 billion from the revised total for the previous month. Within this total, outstanding credit card debt amounted to £70.1 billion, an increase of 7.02% over the year to April 2024. On average, credit card debt was £2,471 per household and £1,308 per adult. Source: https://themoneycharity.org.uk/advice-information/ 

It is almost impossible for anyone to escape the aggressive marketing and advertising campaigns on the television, billboards, radio and magazines for products and services. We are all vulnerable in some way; but unlike individuals who only have themselves to satisfy when considering what to buy, parents have the added burden of beloved children adding to the pressure group. This often can be the straw that breaks the camels back. The marketers know this and cleverly and aggressively target the children as well as the parents when striving to sell their products.

We now live in a society where ones wealth can be displayed not upon what we actually earn or possess, but rather how much we are able to borrow. Buy now pay later, the availability of instant credit for up to 5 - 7 years, and all aspects that are used to entice us into spending more of what we have, or worse still, to spend more of what we don't have!

Many parents are caught in the trap with a two-edged sword. No parent wants to be a scrooge, or to see their child unhappy. There are the pressures of yearning to fulfil your child's desires to keep up with friends and to fit in. In contrast to this, there is the constant drive of the conscience to balance the expenditure with the income, to keep your head above the water, and to maintain some form of control. It is a constant daily battle and the all to easy option is to give in by accepting an even greater depth of debt.

In recent years, the Bank of England revealed that new consumer credit has experienced the fastest rate of growth since records began almost twenty years ago. According to the latest data, consumer credit increased by 5.9% in the year leading up to May 2023, reflecting a significant rise in borrowing among households. This is in line with statistics provided by The Money Charity, which shows that the growth of lending surged between April 2022 and 2023, driven by a combination of economic recovery efforts and pent-up demand post-pandemic.

All of this occurred during a period when, according to the Office for National Statistics (ONS), the rate of total and regular pay growth had been modest. From December 2019 to February 2020, immediately prior to any impact from the coronavirus (COVID-19) pandemic, total and regular pay growth stood at 2.9%. However, the onset of the pandemic brought significant economic disruptions. ONS figures show that this growth rate slowed sharply in the April to June 2020 period, with total pay declining by 1.3% and regular pay by 0.1%. This downturn reflected the widespread cancellation or postponement of bonus payments amid the economic uncertainty.

Despite some recovery in pay growth between July and November 2020, the economic landscape remained challenging, contributing to the reliance on credit and borrowing among consumers as they navigated the financial pressures brought on by the pandemic and subsequent recovery period.

Student loans, small business bale out loans, unsecured personal loans are all debt that if not managed can put extreme stress and pressure on a family. Are you in debt and need help? Contact your local Citizen Advice Bureau, or the Consumer Credit Counselling Service now called step change. If you are in money trouble it is important to get help don't bear the burden alone. There are many people in debt so don't feel as though it is something to be ashamed of or something you need to hide, call someone today.