The UK economy seems a far cry from where it was in the financial crisis of 2008 but the debt levels amongst UK households is currently at its highest since then. Household debt is now at an alarming level and it is a concern for financial experts.
Climbing Household Debt
According to the figures from the Bank of England, borrowing rose sharply in November ahead of the holiday season leading to a rise in consumer debt. The total now owed in unsecured credit from consumers is over £178 billion; this figure is without including mortgages. The pre-Christmas November borrowing alone added up to £1.5 billion which is the highest level seen in the UK since the year 2008.
To put the borrowing into perspective, the average monthly borrowing total was just £157 million in the year 2012 which is worlds away from this November’s total. The increase is not totally out of the blue as the average borrowing has been progressively increasing for the past 4 years.
Historic Highs Come With A Warning
This November’s borrowing is up over 8% on last year’s figure and over 9% on the three months previous. The figures have not gone unnoticed and come with a warning from financial experts. The Money Advice Trust said “These figures confirm that we do need to keep a watchful eye on the huge growth in consumer credit we are now seeing.” This statement came from Chief Executive Joanna Elson, who went on to say that the rise in borrowing is not a shock because it is a sign of a recovering economy however, she warned that “such steep rises in borrowing…are a cause for concern.”
Take Control Of Your Borrowing
Elson was not saying all borrowing is bad and said that many households could deal with their borrowing from 2015 but many others will struggle which could lead to financial problems in the start of the New Year. With over a third of households funding their holiday with borrowed credit she said “research shows that nearly six million Britons are likely to fall behind on their finances this month speaking about January 2016. The Money Advice Trust runs the National Debtline who offer financial advice and Elson strongly urged that anyone struggling with their finances should contact them or a similar charity run service as soon as possible.
It is advisable to pay off any debts as soon as possible while interest rates are still low as this could change in the near future, increasing the cost of repayments. This is backed by the Chief Economist at HIS Global Insight, Howard Archer, who said that consumers should be aware that interest rates are highly likely to start increasing again this year in gradual increments. He said “It is still very possible that the Bank of England will start to lift interest rates in the first half of 2016, with a rise from 0.50 per cent to 0.75 per cent in May being our favoured option.”
With all this in mind, it seems far more sensible to get a grasp of your finances now rather than putting it off as it could cost you more than you think!