Unsecured debt levels rising across the UK

March 24, 2015

Levels of unsecured debts across the UK are on the rise and up to an average of around £9,000 per household nationwide, according to a report from PwC.

The accounting firm’s figures suggest that the overall levels of unsecured debt increased by as much as 9 per cent over the course of 2014.

Suggestions are that the striking rise in debt levels last year were the result of a growing confidence among British consumers in their own ability to manage their borrowings.

However, there are concerns that the appetite among consumers for taking on more unsecured debt could lead to widespread financial problems if the Bank of England ups its base rate of interest in the coming months.

In making this point, PwC’s report highlights the fact that households would need to find an extra £1,000 annually to cover the costs of their debts if the interest rates they pay were to rise by just 2 per cent.

Worryingly perhaps, expectations are that by the end of 2016 the typical British household will have close to £10,000 outstanding in unsecured debts.

“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,” said Simon Westcott from PwC’s financial services practice.

“Despite our survey revealing a relatively high degree of confidence among consumers about their ability to stay on top of their debts, affordability of the UK’s household debt pile may come under pressure in the coming years,” he said.

Around 22 per cent of the increase in unsecured debt levels throughout the UK in 2014 was accounted for by credit card borrowing, while around 32 per cent came from other sources such as personal loans and bank account overdrafts.

There has also been a very considerable increase in the scale of debt burden being carried by a typical British university graduate since tuition fees became much more expensive on average from 2010 onwards.

In explaining the growing appetite for debt in the UK last year, PwC pointed to a greater sense of job security among employed men and women around the country as a key contributing factor.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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