Consumers worried as debts grow

The Bank of England’s (BoE) latest report on fiscal stability has revealed that consumer debt, including mortgages, credit cards and loans, rose by 10.3% over the previous financial year. This means that borrowing among members of the public has now swelled to £198bn. As a result, economists, banks and those in debt are becoming increasingly worried.

Economic stability

Default rates have fallen to near historic lows, and with unemployment decreasing and relatively stable – if low – growth, lenders have lowered interest rates and made more capital easily available.

However, the economic situation is still uncertain; as such, the BoE’s biggest focus is whether or not consumers will be able to continue repaying their debts. They've therefore instructed banks to set aside an extra £11.4bn in reserves and brought forward annual stress tests to ensure they can cope if there are problems.

Debtor fears

It’s not just economic instability that’s causing concern, however. A recent survey by Consumer Intelligence found that one in six adults say they rely on their credit card to get through the month. This suggests that consumer finances aren’t as rosy as the wider stats suggest.

Overall, 10% of people said that they’re worried about the level of debt they’re in. The figure is backed up by data from the charity Money Advice Trust, which has seen an 8% increase in calls to its hotline this year.

It's not just those on low incomes who are facing this issue. Almost 25% of people with a household income of £50,000 or over are failing to clear their credit card obligations each month.

Positive action

As the BoE looks at means to protect financial institutions from any new developments, it may also be wise to consider ways to help those who are reliant on credit to pay their bills. By ensuring debtors can afford to pay back what they've borrowed, and avoid a spiralling situation, the risk of defaults could be significantly reduced.

Those with growing debts, meanwhile, should ensure that repayments are prioritised so that repossessions, fines and court summons can be avoided. And if this become problematic, speak to the lender or enforcement officer immediately to discuss a reasonable solution.

For more information about Dukes Bailiffs and advice on debt settlement, contact one of our operators today.