Consumer borrowing on credit cards, loans and overdrafts is growing at its fastest rate since before the financial crisis, according to figures released this week. The Bank of England has expressed concern about the impact of rising personal borrowing on the stability of the UK economy and the effect that it could have on household finances. It has already advised high street banks to limit the number of high loan-to-income mortgages to prevent households from future increases in interest rates and could launch a wider clamp down.
The news comes as many feel the pinch after the busy Christmas season. Simon Hopkins, Chief Executive of Turn2us commented, “We are seeing a huge surge in people coming to Turn2us for support as families struggle to cope with the added expense of the holiday season. These figures highlight that fact that all too often people are turning to unsustainable borrowing for the essentials when alternatives might be available.”
Total unsecured debt (including consumer credit and student loans but excluding mortgages) rose to £319 billion in the third quarter (September – December) of 2015 – a record high, and well above the £290 billion peak ahead of the financial crisis.
Turn2us No Cold Homes campaign
Recent research by Turn2us’s No Cold Homes campaign also showed that 18 percent of low income working households earning under £30,000 in the UK had used credit cards to pay for energy bills, with 10 percent having taken out loans to cover the cost of heating their home.
National Debtline research
Research by the National Debtline has found that more than 2.5 million people in the UK are likely to seek debt advice or managing money as a result of Christmas spending. The research also showed that more than a third (35 percent) were borrowing to pay for presents and nearly a quarter (23 percent) to pay for food. The result is that nearly one in eight (12 percent) are likely to fall behind on their finances in January equating to an estimated 5.6 million people.
Simon Hopkins commented: “Many of those struggling financially are unaware of the support available in the form of welfare benefits and charitable grants. I urge anyone in this situation to ensure they are aware of the options available, and for the agencies that work with people struggling with debt to do all they can to help them access this support.”
Turn2us for help
If you are struggling to make ends meet, use our Benefits Calculator to check your entitlement to benefits and our Grants Search to see if you are eligible for help from a charitable fund, based on your personal circumstances and needs. The Your situation section on our website contains resources on benefits grants and managing money, including useful links sheets and a Find an Adviser tool to help you find national and local sources of further help.