Household debt reaches new high of £319bn

8th January 2016

img

Unsecured household debt has reached a new high, according to research by the TUC.

 

Excluding mortgages, collective household debt stood at £319 billion in the third quarter of 2015, a record high, and well above the £290 billion peak of 2008, just before the financial crisis.

 

Unsecured debt as a share of household income is now 26.5% – the highest it has been for five years and the average debt held by a household was £11,800 in Q3 2015, up £600 on the previous year. On this household measure, debt has never been higher.

 

Bank of England analysis published earlier this week shows household borrowing surged in the run up to Christmas. The monthly cash rise in consumer credit for November 2015 was the highest since February 2008.

 

The TUC said the problem of household debt was far wider than ‘Christmas on credit’ and its analysis follows a recent forecast by the Office of Budgetary Responsibility that UK spending was set to be £40 billion in deficit for 2015 – another record high.

 

Bank of England chief economist Andy Haldane told a recent Treasury Select Committee that consumer credit is ‘picking up at a rate of knots’.

 

The TUC said this level of credit should worry the government as a signal that fundamental problems with the economy have not been fixed.

 

TUC general secretary France O’Grady said: ‘Rising household debt signals that too many people are still struggling to make ends meet. With pay growth slowing, and households facing a lost decade on wages, it’s no surprise that more families are relying on borrowing to meet the costs of day-to-day essentials.

 

‘Although employment has risen, wages are still worth less today than eight years ago. This has left families struggling to meet the rising cost of living. We need a recovery where families can afford to pay their bills and raise their children without relying on credit cards and payday loans.

 

‘The government must do more to increase job security, with the hours and pay that people need to get by. Otherwise we’ll be heading back to the same problems that led to the last financial crash. Ministers should lead by example and bring an end to years of real-terms public sector pay cuts.’

 

Leave a Reply

Your email address will not be published. Required fields are marked *