Sharon McDougall - 3rd August 2022 - 2 minutes to read
Levels of consumer debt increased very sharply across the UK during June, with millions of people struggling to make ends meet as inflation pushes up prices and hammers their incomes.
According to the Bank of England, there was an extra £1.8 billion borrowed by consumers in June, which represents a stark jump from an £800 million increase in May.
Of the extra £1.8 billion worth of debt added in the month, around £1 billion was borrowed via credit card debt, with the rest being accounted for by personal loans and other forms of consumer credit.
The scale of extra credit card debt taken on during June this year represents a 12.5 per cent year on year increase, which is the steepest rise in overall credit card borrowing seen since 2005.
While increases in household borrowing can sometimes be interpreted as a sign of growing consumer confidence, analysts generally agree that recent increases are a result of people relying more on debt to cover their essential outgoings.
“While the received wisdom is that rising borrowing signals consumer confidence, we know all too well that it can also be a sign of financial pressure,” commented Richard Lane from the debt help charity StepChange.
“We urge anyone considering borrowing to make ends meet to seek advice from a reputable source to see whether other options may provide a more sustainable way of addressing the pressure of debt.”
StepChange recently noted that issues associated with the rising cost of living are now the foremost reason why people contact its representatives for debt advice.
The charity has said that in June, the cost of living was cited by almost one in five of its new clients as a key reason why they’re in debt and struggling to manage their money.
“It’s no surprise that we finally reached the point in June where the rising cost of living became the most commonly mentioned reason for debt among people turning to us for advice,” said Mr Lane, StepChange’s director of external affairs.
“People are seeing the financial cushion between their income and their essential spending being squeezed and, in many cases, turning negative.”
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