The latest Money Stats indicate that consumer credit has risen above £190 billion, the highest level seen since 2008. The report by the Money Charity says that’s £7,042 for every household in the UK in credit cards, personal loans and other borrowing not secured against property. Day-to-day, people have more control over how much they borrow to spend than they do over their mortgages. So when incomes squeezed and borrowing became harder, consumer credit saw a large fall after the financial crash. And it didn’t really begin to rise again until 2014, but is now growing at an annual rate of 8% so far in 2016, or £476.07 per household since October 2015. That’s not quite like the double digit percentage rises we saw in the late 90s and early 00s, but it’s still more than three times the 2.4% average wage rise. Compared to the average mortgage interest rate of 2.71%, unsecured borrowing is much more expensive.
The average interest rate on credit card lending bearing interest was 18.33% in October. For a £5,000 personal loan it’s 9.06%, and for a £10,000 loan it’s 3.75%. If you have an overdraft, you’ll be paying 19.70%!
These higher rates of interest mean it’s easy to slide into problems if you’re not keeping borrowing under control. With inflation and interest rate rises predicted next year, we should all be getting ready for a time when these debts become even harder to manage.
Michelle Highman, Chief Executive of The Money Charity said “It is figures like these that remind us at The Money Charity how important our job is. We’re out there every day helping young people and adults learn the knowledge, skills, and attitudes they need for a healthy relationship with money. £7,000 of unsecured debt for every household is a worrying figure. If it’s well managed, not all debt is bad. It can be a really useful to us, helping to spread the cost of big purchases, or smooth out uneven incomes. But if you don’t plan, or you don’t know what you’re entering into, it can be very dangerous as well. And if you are spending more than your bringing in month after month, you know you’re in trouble.“
Other key points from December’s Money Statistics include:
- Citizens Advice Bureaux across England and Wales dealt with 612,209 new inquiries in the three months between July and September 2016.
- The Pensions Regulator estimates that at least 6.871 million employees had joined a pension scheme under auto-enrollment by the end of October 2016.
- According to the November 2016 Budget analysis from the Office for Budget Responsibility, public sector net debt is forecast to peak at 90.2% of GDP in 2017-18, before falling to 84.8% of GDP in 2020-21.
Here is an overview of The Money Charity’s latest statistics for December 2016:
Personal debt in the UK
Total UK personal debt
People in the UK owed £1.508 trillion at the end of October 2016. This is up from £1.455 trillion at the end of October 2015 – an extra £1041.23 per UK adult. The average total debt per household – including mortgages – was £55,855 in October. The revised figure for September was £55,688. Per adult in the UK that’s an average debt of £29,862 in October – around 113.6% of average earnings. This is slightly up from a revised £29,773 a month earlier. Based on October 2016 trends, the UK’s total interest repayments on personal debt over a 12 month period would have been £50.831 billion. • That’s an average of £139 million per day. • This means that households in the UK would have paid an average of £1,883 in annual interest repayments. Per person that’s £1,007 – 3.83% of average earnings. According to the Office for Budget Responsibility’s November 2016 forecast, household debt is predicted to reach £2.294 trillion in Q1 2022. This makes the average household debt £84,964 (assuming that the number of households in the UK remained the same between now and then).
Consumer credit debt
Outstanding consumer credit lending was £190.13 billion at the end of October 2016. • This is up from £177.3 billion at the end of October 2015, and is an increase of £254.53 for every adult in the UK. Per household, that’s an average consumer credit debt of £7,042 in October, up from a revised £6,995 in September – and £476.07 extra per household over the year. It also means the average consumer credit borrowing stood at £3,765 per UK adult. This is up from a revised £3,740 in September. Total credit card debt in October 2016 was £66.2bn. Per household this is £2,452 – for a credit card bearing the average interest, it would take 25 years and 6 months to repay if you made only the minimum repayment each month. • The minimum repayment in the first month would be £58 but reduces each month. If you paid £58 every month, the debt would be cleared in around 5 years and 4 months.
Net lending and write-offs
Total net lending to individuals by UK banks and building societies rose by £4.9 billion in October 2016 – or £159m a day. • Net mortgage lending rose by £3.3 billion in the month; net consumer credit lending rose by £1.6 billion. • In Q3 itself they wrote off £801 million (of which £584 million was credit card debt) amounting to a daily write-off of £8.7 million.
In 2014/15, the average maintenance loan awarded for full-time undergraduates from England was £3,890, and the average maintenance grant awarded to successful applicants was £3,008. The average debt owed per student at the end of 2013/14 was £12,651 (this is debt for English students and EU students in England, including loans for Further and Higher Education. It doesn’t include ‘mortgage-style’ loans, as these were sold by Government in May 2013). The average debt for the 2016 cohort which most recently entered repayment was £24,640. – this is the last group who will not have paid £9,000 tuition fees.
Advice, insolvency, and the courts
Citizens Advice Bureaux across England and Wales dealt with 612,209 new enquiries in the three months between July and September 2016. Debt was the second largest advice category (behind Benefits) with 366,000 issues. This unchanged on the same period last year. Debt issues represented 26% of all problems dealt with over the period. Based on quarterly figures up to the end of September 2016, Citizens Advice Bureaux in England and Wales are dealing with 4,022 debt problems every working day. • CAB cite the loss of legal aid and falling trends in many individual debt types for the reduction in debt advice cases. There were 24,251 individual insolvencies in England and Wales in Q3 2016. This is equivalent to 264 people a day or, one person every 5 minutes 28 seconds. This was up 6% on the previous quarter and up 19.3% on the same period a year ago. Every day, on average, 42 people were made bankrupt, 71 Debt Relief Orders were granted, and 151 Individual Voluntary Arrangements were entered into. In the 12 months ending Q3 2016, 1 in 515 adults (just under 0.19% of the adult population) became insolvent. 2,489 Consumer County Court Judgements (CCJs) were issued every day in the six months to Q3 2016. The average value of a Consumer CCJ in Q3 2016 was £1,642.
Mortgages, rent and housing
Outstanding mortgage lending stood at £1.318 trillion at the end of October. • This is up from £1.278 trillion a year earlier. That means that the estimated average outstanding mortgage for the 11.1m households with mortgage debt was £118,992 in October. The average mortgage interest rate was 2.71% at the end of October. Based on this, households with mortgages would pay an average of £3,225 in mortgage interest over the year. For new loans, the average mortgage interest rate was 2.16%. Using the latest figures from the Council of Mortgage Lenders, this means new mortgages would attract an average of £3,464 in interest over the year. According to the Council of Mortgage Lenders, gross mortgage lending in October totaled an estimated £20.6 billion. • This is up 5% on October 2015, and unchanged from September. The Financial Conduct Authority reports that 60.82% of mortgage lending in Q2 2016 was for 75% or less of a property’s value. • 4.7 % of lending was for mortgages for over 90% of a property’s value. There were 42,594 loans approved for house purchase in September, according to the British Bankers Association (BBA), almost unchanged from a year earlier. The average loan approved for house purchase rose to £184,200.
The median rent in England across all property types for the 12 months to March 2016 was £650, data from the Valuation Office Agency shows. In London this was £1,452. For a single room, the average monthly rent was £360 – in London this was £585 (63% higher). The average monthly rent for a two-bedroom house in England was £600 – in London this was £1,500 (150% higher). According to the Office for National Statistics, private rental prices in Great Britain rose by 2.3% in the 12 months to September 2016. Rental prices increased in all the English regions over the year to June 2016, with the South East seeing the biggest increase (3.5%) and the North East seeing the lowest rise (1%). Figures from DCLG show that in 2014/15, private renters spent an average of £775.67 a month on rental payments, while owner-occupiers paid £663 in mortgage payments. • These figures are the mean payments, so can be skewed by very high figures. Inclusive of all benefits, private renters spent an average of 43% of their income on rental payments. Owner-occupiers spent on average 19%. Weekly rents in the social housing sector were £98 for housing association renters and £89 for local authority renters. 33% of households owned their home outright, while 30% were mortgagors. 19% rent privately, and 17% pay a social rent. • 2012/13 was the first year ever there outright owners where the largest tenure group. • The rate of private renting is the highest it has been since the 1960s.
Arrears and repossessions
According to the Financial Conduct Authority, at the end of Q2 2016 there were 218,279 mortgage loan accounts with arrears of more than 1.5% of the current loan balance. • This is 5% up on the previous quarter. 60.49% of payments due for loans in arrears were received in Q2 2016. The Council of Mortgage Lenders reports that 92,500 (0.84%) of mortgages had arrears equivalent to at least 2.5% of the outstanding mortgage balance in Q2 2016 – the lowest since 2006. Since the end of Q2 2015, this figure has dropped by 39 a day. The Council of Mortgage Lenders estimates that 6,100 owner-occupied properties were taken into possession in the year to June 2016. This equates to 17 properties being repossessed every day, or one property being repossessed every one hour, 26 minutes. Every day in Q2 2016, 48 mortgage possession claims were issued and 34 mortgage possession orders were made. 370 landlord possession claims were issued and 306 landlord possession orders were made every day.
Spending and loans
How we spend
During August 2016 an average of 464 purchases were made in the UK every second using debit and credit cards, based on figures from the UK Cards Association. • An average of £20,273 was spent every second using debit and credit cards. • Purchases using plastic cards were worth £1.75 billion every day during August. • In total, 106 purchases using credit cards were made every second, worth £5,862. Meanwhile, data from LINK shows that, on average, 103 cash machine transactions (including balance enquiries and rejected transactions) were made every second in October 2016; • In total, cash machine transactions were worth an average of £4,175 per second. • LINK’s transaction figures do not include transactions or withdrawals made by customers at their own bank’s or building societies’ ATMs.
What we buy
In Q2 2016, households in the UK spent £92.93m a day on water, electricity and gas – or £3.44 per household per day. In August 2016 the average price of unleaded petrol rose by 3.3 ppl (pence per litre) to 115.1ppl. • This meant it cost £57.55 to fill a 50 litre unleaded tank. • The average price of diesel rose to 116.9ppl. According to the AA, it costs 51.60 pence per mile to run a car. This is based on buying a new petrol car for between £13,000 and £18,000, replacing it after 4 years, and averaging 10,000 miles per year. • Do 30,000 miles per year in a car that cost less than £13,000 and the cost falls to 25.46ppm • Do 5,000 miles per year and spend £25,000 – £32,000 on the vehicle and the cost soars to 126.04ppm. LV’s ‘Cost of a Child’ report estimates that parents now spend a record £231,843 on raising a child to their 21st birthday – £30.23 a day. This is up 1.1% compared to last year, and has increased 65.1% since the study first began in 2003. • Education and childcare are the main areas of expenditure, costing £74,430 and £70,466. • The cost of education (including uniforms, after-school clubs and university costs) has increased 128% since 2003, while the cost of childcare has risen by 77.9%. • Households now spend 38% of their annual income on raising a child.