UK household debt soars to £1.5trn, charity warns

UK household debt has swollen to £1.5trn in the UK for the first time, with indebtedness growing at the fastest rate since before the credit crunch of 2007, according to new research.

Before the peak of the financial crisis in 2008, personal debt in the UK reached £1.4trn.

Following a recent low of £1.36trn in December 2011, calculations by the Money Charity put growth in the last five year at £140bn to over £1.5trn this month, which is £55,683 per household and £1,037 extra per adult.

Adults in the UK owe on average nearly £30,000 each, which around 113.7% of average total annual earnings and 83% of the country’s annual economic output.

Majority of this debt (87%) is in the form of mortgages secured by property with gross mortgage lending at £20.5bn. Individuals also owe an average of £3,737 in loans and credit cards. Outstanding consumer credit lending was £188.7bn at the end of September and total net lending to individuals by Banks and building societies rose by £4.7bn or £157m a day.

The Office for Budget Responsibility’s July 2015 forecast predicts household debt will rise further to £2.6trn in the first quarter of 2021, raising the average household debt to £94,481.

The charity also highlighted that in the same time, government debt also grew by £108m a day and £4,090 per second.

The charity’s figures come after the Bank of England last week warned inflation rates are likely to rise to 2.7% in 2017.

Money Charity chief executive Michelle Highman said: "With interest rates so low at the moment, it's easy to think that high levels of debt are manageable. More inflation means higher interest rates, which we'll all have to pay on our mortgages, loans and credit cards. If you're in debt, particularly if you have a variable mortgage, it's time to prepare by taking control of your finances."

Total interest payments on personal debt over a 12 month period was £51bn, which is an average £140m per day.

The charity points at rising house prices, low levels of savings and the normalisation of debts as reasons for high levels of debt.

Citizens' advice bureaux across England and Wales have reported debt is the second most common advice category with 371,000 issues, averaging out to 4,077 debt problems every working day.

A total of 264 people a day are declared insolvent or bankrupt which is equivalent to one person every five minutes and 28 seconds, with 17 properties repossessed every day.