Household debt at a new high
Household debt in the UK has reached a new high, at 10.8% above levels than the start of the credit crunch in December 2008. But what does this mean for the homeowner?
Debtors ‘breathing space’
In January, the Bank of England (BoE)'s Governor Mark Carney warned of the growing amount owed by UK households. He noted that many debtors are now turning to credit cards to pay for essential living costs, as opposed to just luxury items.
Not only that, but a lack of housing has led to steadily rising property prices, with the amount buyers need to borrow following the same trend. This means personal debt in the UK has risen to £192.2bn, according to data published by the BoE. Furthermore, the statistics show an annual debt growth of 10% for unsecured loans, meaning that there's no sign of a cooling period in the near future if the pattern continues.
It's estimated that a further million people will fall into problem debt in the next year. As a result, debt charity Step Change has called upon the government to introduce a scheme that would give debtors 12 months’ ‘breathing space’ in which to get back on track.
The proposed ‘breathing space’ scheme would seek to give debtors statutory protection from interest and penalty charges. Under current law in the UK, debtors would only qualify if they become insolvent, making it an extreme case situation.
According to Step Change's Chief Executive Mike O’Connor, “millions of people are increasingly vulnerable to changes in circumstance that could pitch them into a downward cycle of debt. The ‘breathing space’ scheme is a practical way to support those struggling at little or no cost to the Exchequer."
In other words, the programme would encourage households to review their fiscal position before continuing to further borrow money, alleviating risks of having their belongings or even their home repossessed.
If you're struggling to maintain healthy finances, contact one of our operators at Dukes Bailiffs for advice.